The case, Dynamex Operations West, Inc. v. Superior Court of Los Angeles, dealt with a delivery service that classified its workers as ICs. A driver filed a class action suit, arguing that the classification was improper.

While the ruling did not resolve this specific case, it provided a new framework for lower courts adjudicating the dispute and others like it.

In an unexpected turn, the court established an entirely new test. Under the previous “Borello” framework, the main consideration was whether the company had the right to control the manner by which the worker performs the work.

But under the new ABC test, businesses must show that the worker is (1) free from the control and direction of the employer; (2) that the worker performs work that is outside the hirer’s core business; (3) and the worker is customarily engaged in an independently established trade, occupation or business.

“When a worker has not independently decided to engage in an independently established business but instead is simply designated an independent contractor … there is a substantial risk that the hiring business is attempting to evade the demands of an applicable wage order through misclassification,” Chief Justice Tani Cantil-Sakauye wrote for the court.

The decision has particularly stark effects for the so-called gig economy, as ride-sharing giants like Uber and Lyft have increasingly come under scrutiny for classifying their workers as independent contractors and not employees. Additionally, the ruling is likely to have a major effect across almost all sectors.

The court provided other examples for occupations like plumbing.

“A plumber temporarily hired by a store to repair a leak or an electrician to install a line would be an independent contractor. But a seamstress who works at home to make dresses for a clothing manufacturer from cloth and patterns supplied by the company, or a cake decorator who works on a regular basis on custom-designed cakes would be employees.”

Furthermore, a worker won’t be considered an employee “only if the worker is the type of traditional independent contractor … who would not reasonably have been viewed as working in the hiring business,” the court added.

More broadly, the court also framed the issue as one of fairness, believing that denying employee status is harmful to a large swath of workers.

Companies have a substantial incentive to classify workers as ICs over employees, as they don’t have to pay their social security or payroll taxes. Furthermore, workers have additional protections if they’re employees, such as unemployment insurance.

Worker rights groups are hailing the decision as a win, with the National Employment Law Project declaring that “the gig is up.”

“It means that companies in industries from construction to tech to homecare and trucking will no longer be able to dodge minimum wage laws by pretending that the workers who form their workforces are somehow not their employees,” the group’s spokeswoman Rebecca Smith added.

To read the ruling, visit: http://www.courts.ca.gov/opinions/documents/S222732.PDF

New proposed rules unveiled this month by the state’s Department of Motor Vehicles drew sharp complaints from the leading companies in the field — Google, General Motors, Ford, Volkswagen and Honda — as being far too onerous and certain to slow innovation. They are among 18 firms with licenses to test autonomous vehicles in California.

A nascent industry group — The Self-Driving Coalition for Safer Streets, whose members include Lyft, Uber Technologies and Volvo — released a statement that the rules “could greatly delay the benefits that self-driving vehicles can bring to safety and mobility for individuals.”

Among the proposed state rules spurring concern:

• A regulation that would require a one-year delay between testing a vehicle with new technology and its use on public streets and highways.

• A regulation that would require driverless vehicles being tested to have vehicle data recorders whose information is regularly provided to the DMV, which automakers fear could lead to proprietary information leaking out.

• A regulation that allows police to demand that information from the vehicle data recorders be turned over within 24 hours without authorities having to get a subpoena or warrant.

• A requirement that all local governments give their permission before an autonomous vehicle could be used on their roads and highways.

The last requirement drew a sharp response from Ron Medford, the director of safety for Google’s self-driving car project, who wondered why bureaucrats didn’t grasp how much red tape this would create. Medford said the rule was “unworkable,” according to a Reuters report.

Perhaps the only state action that was greeted warmly was regulatory language that suggested the DMV would be willing to accept testing of vehicles without steering wheels more quickly than expected.

Sharp contrast between state, federal approach

The state’s framework is based in many ways on ideas outlined in a federal proposal unveiled in September. That proposal generally won praise from autonomous automakers and from such tech websites as Ars Technica for heeding industry recommendations — especially in how to categorize levels of autonomy in vehicles being developed. Instead of using outdated language crafted by federal officials, the U.S. Department of Transportation adopted what are known as the SAE standards, which classify vehicles from 0 (totally human controlled) to 5 (totally automated).

But the reason the federal proposal won cheers while the California DMV’s plan won jeers is that the federal proposal amounts to a collection of guidelines, not hard rules. The Obama administration also underlined how important it considered autonomous vehicles to be in our future economy by having Jeffrey Zients, director of the National Economic Council, join Transportation Secretary Anthony Foxx at the news conference unveiling the rules. This was reflected in the headline on The New York Times coverage of the event: “Self-Driving Cars Gain Powerful Ally: The Government.”

The California state government sought to offer reassurance that its rules were drafts open to revision and that it wanted and welcomed input from the 18 companies testing autonomous vehicles in the state.

But the assurance didn’t come from Gov. Jerry Brown or one of his top aides. It came from Brian Soublet, deputy director of the California DMV, who said, “The goal is making sure that we can get this life-saving technology out on the streets.’

(AP Photo/Eric Risberg, File)

Labor groups have sought out relationships with Uber drivers, whom the company recently settled with, but has yet to classify as employees.

“A day after Uber announced a $100 million settlement with some drivers in California and Massachusetts,  the Teamsters announced plans to form an association for workers in California’s ride-hailing industry,” USA Today reported. “The Teamsters said drivers had approached the transportation union seeking help with benefits, a dispute resolution procedure, legal and tax services, advocacy assistance, and a stronger voice on the job,” the paper added, although the way such assistance would be organizationally formalized remained unclear. “Members would probably not join the actual union, but would instead join an association, which could possibly be funded, though not controlled, by Uber.”

Crunching the numbers

So long as Uber and its fellow ride-share companies stay away from the employer-employee model, unionization would be off the table. “One problematic aspect for the Teamsters is that Uber and Lyft drivers are still classified as independent contractors,” as Fortune noted. “As a result, these workers would not be able to form a traditional union. Instead they would have to form an association, which would have limited bargaining abilities and be allowed to speak on the behalf of drivers.”

For that reason, Uber was willing to shell out substantial cash in its California and Massachusetts settlements — “up $84 million,” as the Verge observed, plus “another $16 million if the company eventually goes public.”

“In exchange, Uber gets to keep its business model — drivers are ‘partners’ with the flexibility to make their own schedules, but lacking access to traditional benefits like health care — which has helped fuel its growth across the world, as well as its other worldly valuation of $62.5 billion –€” making it the most valuable technology startup on the planet.”

“If the lawsuit had gone to trial, and a jury decided that drivers indeed deserved to be full employees, then Uber could have suddenly found itself responsible for all sorts of extra costs, from Social Security payments to minimum wage requirements,” the Verge suggested. But while some Uber drivers have hoped for more benefits, some analysts have questioned whether Uber could sustain itself at all without relying on its unusual business model. 

More hurdles

And in California, the settlement will not become law without clearing at least one more hurdle. “Uber’s settlement depends on the approval of a single judge,” Forbes noted. “This is by no means a foregone conclusion, as Uber’s rival Lyft learned earlier in April when Judge Chhabria rejected its $12.25 million settlement of a similar class action. Among other reasons given for the rejection, the amount Lyft would pay was ‘glaringly’ inadequate monetarily, did not provide sufficient payment to the state of California under the Private Attorney General Act claim, and the non-monetary relief, which did not meet one of the lawsuit’s primary goals of reclassifying drivers as employees, was insufficient to overcome these problems.”

At the same time, according to the site, the state’s Private Attorney General Act could allow future suits by “unions such as the International Brotherhood of Teamsters, which continues to attempt to organize Uber drivers in California and in the state of Washington,” or “the U.S. Department of Labor and the National Labor Relations Board, which have made clear their skepticism of the independent contractor model and intention to allow organization by misclassified employees.”

In fact, this March, the NLRB already sued Uber in a San Francisco federal court, “demanding it obey subpoenas related to five unfair labor practices cases,” as Politico reported. “And just last week an NLRB regional director filed a complaint against a Los Angeles company for allegedly misclassifying its trucking workers as independent contractors. That gives the board an opportunity to rule that misclassifying workers is an unfair labor practice, an issue with obvious relevance to Uber.”

“The California Public Utilities Commission agreed last Thursday with a judge’s recommendation to fine Uber $7.6 million for failing to meet data reporting requirements in 2014,” the Los Angeles Times reported. “Uber will appeal the decision, but has agreed to pay the fine to avoid a 30-day suspension of its license in its home state.”

With a valuation in excess of $60 billion, the fine alone posed little challenge to Uber’s cruise toward ever-greater market dominance. But lawmakers and regulators around the world have littered its road to success with obstacles, repeatedly calling into question the viability of its business model. California, which has stayed at the forefront of technological change and aggressively regulated automotive companies like Volkswagen who ran afoul of the rules, has been seen as both a bellwether and a must-win jurisdiction for Uber.

Broad opposition

The company’s home state hasn’t always cooperated. This month’s fine arose from a protracted dispute reaching through several branches of state government. “In June, a state labor commissioner decided that an Uber driver was an employee and not a contractor — a ruling that was non-binding, but could set a precedent for drivers to ultimately demand more perks and pay. A month later, an administrative law judge recommended that the San Francisco company be fined and suspended from operating in California for the failure to report driver data,” the Times noted. “Uber filed an appeal last August, and a modified decision was made public Wednesday, recommending an even higher fine of $7,626,000, plus a $1,000 contempt fine.”

In addition to penalizing the company, California wanted to threaten it as well. As the Guardian reported, “State lawyers recommended a ruling that gave Uber 30 days to pay the fine or else lose the ability to operate in California.” With little choice, Uber decided to pony up the funds to the California Public Utilities Commission, which oversees state businesses devoted to transportation.

A spate of suits

The big-ticket fine joined a long list of legal troubles Uber has devoted substantial resources to navigating. “In an ongoing civil suit against Uber, the district attorneys of San Francisco and Los Angeles have claimed that ‘systemic failures’ in the company’s background-check process have led to registered sex offenders, identity thieves, burglars and a convicted murderer becoming drivers for the service,” as the Wall Street Journal observed. “The suit claims Uber misled consumers about the effectiveness of background checks and seeks a permanent injunction of the business.” Rather than using a service called Live Scan, employed by many California taxi companies, Uber uses Checkr, which matches convictions to individuals based on an analysis of addresses associated with their name, the Journal added.

At the same time, Uber drivers were recently notified of their inclusion in a class action lawsuit against the company. “Uber agreed to the terms of a $1.8 million suit alleging it inappropriately charged customers an ‘airport fee toll’ late last year,” according to TechCrunch. “The lawsuit, filed in November 2015, accused Uber of charging customers the ‘airport fee toll’ several months before the airport required it, letting drivers keep the fee instead. The lawsuit, which affects an estimated 355,000 customers, was a surprise to many folks who had no idea they were involved.”

That news helped sour a new victory Uber scored at Los Angeles International Airport, a huge source of potential business. Officials okayed Uber pickups at the airport “exactly one month after Lyft launched at LAX, which was originally announced by LA’s Mayor Eric Garcetti,” as TechCrunch reported separately. “Uber and Lyft had battled for months with the airport and the L.A. City Council to reach an agreement that allowed pickups at the airport.”

A San Francisco lawsuit pushing to make Uber drivers employees has gathered steam dramatically, thanks to a new ruling that the case against the dominant rideshare company can proceed as a class action.

A big issue

The hotly-anticipated decision by the judge hearing the case threw another log on the fire of controversy surrounding Uber, which has become a political football even as it has leveraged former Obama campaign officials to launch an unprecedented lobbying and PR campaign in California and other states. “Three drivers sued Uber in a federal court in San Francisco, contending they are employees and entitled to reimbursement for expenses, including gas and vehicle maintenance,” Reuters recounted.

“In the ruling on Tuesday, U.S. District Judge Edward Chen in San Francisco said California drivers could sue as a group on the question of whether they are employees or contractors, and over their demand for payment of tips that were not passed on to them. Drivers’ attorneys must submit more evidence to sue as a group for reimbursement of other expenses.”

But drivers who came on board as of May of last year had to specifically opt out of arbitration in order to join the action, Chen ruled.

The sweep of a class action suit would be eye-popping. As Wired noted, “as many as 160,000 Uber drivers in California could join the case seeking mileage and tip reimbursement from the company, presently valued at $51 billion.” Trying to head off the avalanche, Uber had asserted “that the idea of a typical Uber driver was a false notion, meaning that no individual plaintiffs could truly represent the interests of all drivers,” Wired added. That argument proved inadequate to sway Chen, although — to the surprise of few — Uber’s attorneys quickly observed that they were likely to appeal the decision.

Adding to Uber’s woes, a state judgment last month echoed Chen’s interpretation of the law. As Reuters reported, California’s Employment Development Department “determined that a former Uber driver in Southern California was an employee, not an independent contractor as the company has claimed, and the decision was upheld twice after Uber appealed by both an administrative law judge and the California Unemployment Insurance Appeals Board.”

Economic politics

Chen’s holding has taken on grand significance because of the potential economic impact on Uber’s relationship with its employees. Those on the left of the political spectrum tend to claim that Uber is harming the economy by depriving its drivers of the kinds of benefits and stability that are generally considered appropriate to workers formally employed at a company.

Those to the right, meanwhile, counter that Uber is helping the economy by opening up a once-cornered market to greater productivity and choice among consumers and producers alike.

Free-market and libertarian groups lashed out at the decision, holding up rideshare companies like Uber as more competitive, demand-based services than traditional cabs and liveries. Taxis’ “costly ‘medallion’ system limits competition and preserves the big companies’ market share regardless of poor quality and high prices,” FreedomWorks argued. “The use of technology to innovate and find new ways to solve old problems is one of the most beautiful things about free markets. It’s unfortunate that California wants to deny these benefits to its citizens.”

Further lawsuits

Adding to the rideshares’ legal woes, activists for disabled riders have also filed potentially significant lawsuits. Passengers and advocates have “raised concerns that app-based ride service Uber and its main rival, Lyft, aren’t doing enough to meet the needs of passengers in wheelchairs,” the Los Angeles Times reported. “Both companies are facing lawsuits across the country — in California, Texas and Arizona — alleging that their drivers discriminate against people with wheelchairs and seeing-eye dogs. Some say compliance with the Americans with Disabilities Act could become a stumbling block for the companies as they look to expand and solidify their role in the rapidly changing world of on-demand transportation.”

Nick Harris / flickr

For ride-booking services such as Uber and Lyft, California’s roller-coaster ride has only just begun, with recent developments underscoring high demand among the public and high levels of discomfort among public officials. As regulators have cracked down in some places — imposing fines and suspensions — they have eased off in others, permitting the popular app-based companies to expand their areas of operation.

An adverse ruling

At the statewide level, Uber in particular has faced a costly, uphill climb. After years spent tangling with the state Public Utilities Commission, the agency has run out of patience with Uber’s degree of compliance. “The California Public Utilities Commission has slapped the ride-booking company with a $7.3 million fine and ordered its suspension in the state,” as Endgaget reported, “after it failed to comply with the agency’s reporting requirements.”

“When the state legalized Uber and similar services back in 2013, one of its conditions is the submission of detailed reports to make sure drivers accept passengers regardless of their conditions or locations. Unfortunately, Uber turned in incomplete data for 2014 and has been refusing to show CPUC the information it requires for the past few months.”

CPUC revealed that Uber did not disclose data including “the number of requests for rides from people with service animals or wheelchairs; how many such rides were completed; and other ride-logging information such as date, time, Zip Code and fare paid,” according to the Los Angeles Times. Although the fine struck some observers as excessive, it would amount to a drop in the bucket for Uber, which boasts a massive operating budget. “For Uber, which has raised $5.9 billion in venture capital investment, a $7.3-million fine would amount to less than 1% of that,” the Times noted.

Surprising few, Uber responded to the adverse ruling with a promise to escalate. “We will appeal the decision,” said the company in a statement.

“Uber has already provided substantial amounts of data to the California Public Utilities Commission, information we have provided elsewhere with no complaints. Going further risks compromising the privacy of individual riders as well as driver-partners. These CPUC requests are also beyond the remit of the Commission and will not improve public safety.”

LAX expansion

In a separate, unanticipated development, however, Los Angeles International Airport agreed in principle to open its busy traffic circles to Uber and Lyft. To date, travelers have had to rely on workarounds such as meeting drivers just outside LAX, or circumventing the restriction in other ways. In the face of protesting taxi drivers, the airport’s Board of Commissioners voted to make it the largest airport in the nation to grant ride-booking companies full access, according to the Associated Press.

As the Washington Post observed, the favorable decision came at a time when Uber and similar services have faced an increasingly hostile regulatory environment beyond the CPUC fine and potential suspension. “Last month,” the Post recounted, “the California Labor Commission ruled that an Uber driver was an employee, and not an independent contractor, of the company.” Uber announced earlier that it would appeal this decision as well.

Although the struggle to settle the status of ride-bookings was far from over, observers notched the LAX vote as a win not only for Uber and Lyft but for travelers. “The move could significantly alter the way thousands of Southern Californians and tourists navigate the nation’s third-busiest airport, long criticized for traffic congestion and lack of a direct connection to the region’s rail system,” the Times suggested. “If the companies can quickly comply with the airport’s rules, Lyft and Uber services — some offering lower fares than taxis — could be available by September, officials said.”

With public opinion in California still on its side, Uber especially stands to benefit from moving rapidly to satisfy airport officials.

The next time you grab a ride with Uber or Lyft, a California lawmaker wants to make sure a registered sex offender isn’t behind the wheel — something the ride-hailing companies say they already go the extra-mile to prevent.

Sen. Cathleen Galgiani, D-Stockton, recently introduced a bill that would ban ride-hailing companies from using any driver who is required by law to register as a sex offender.

Lyft, Uber and other smartphone-based ride-hailing companies already use private background checks on potential drivers. But there’s no California law explicitly banning sex offenders from driving for the companies.

“At a minimum, registered sex offenders should not be a part of this industry,” said Trent Hager, Galgiani’s chief of staff, told CalWatchdog.com on Tuesday.

Reports of alleged assaults by ride-hailing drivers on their passengers have surfaced in recent years. Galgiani’s bill was not sparked by any such incident in California, but instead seeks to prevent one from happening, Hager said.

In a written statement, a spokesman for Uber said the company’s “policy already prohibits publicly registered sex offenders from partnering with Uber as drivers on the platform.”

The company added that all Uber drivers “are required to undergo an extensive background check, which is performed on our behalf by Accurate and/or Checkr. Both are accredited by the National Association of Professional Background Screeners.”

On its website, Lyft states “We also do not allow individuals to drive who are registered on the National Sex Offender Registry and DOJ50-State Sex Offender Registry at the time our background check is conducted, regardless of how long ago the individual was put on that registry.”

The industry’s growing popularity has exposed it to extra scrutiny in California, where state officials say ride-hailing firms should be regulated like taxi companies.

In the taxi industry, driver applicants must pass criminal background checks administered by local agencies, including police and sheriff departments.

Rick Wright, of the San Diego County Sheriff’s Department’s licensing division, which performs background checks on taxi driver applicants in the San Diego region, said being a registered sex offender would disqualify a potential taxi driver.

Galgiani’s bill was introduced July 8 as a “gut-and-amend” replacing a bill she previously introduced on an unrelated topic.

It is expected to be heard in the Senate Energy, Utilities and Communications Committee in August, after lawmakers return from a summer recess.

To become law, it must be approved by the Senate, Assembly and signed by Gov. Jerry Brown.

The reactions ranged from praise for improving treatment of Uber drivers to alarm about the perceived stifling of a booming new niche industry to a third camp which described the California decision as being less important than most believed. Here’s a sampling.

A New York Times analysis framed the ruling as being a pivotal moment for labor in the 21st century:

Companies like Uber and its rival Lyft, and Instacart, a grocery delivery service, have long faced questions about whether they are creating the right kind of employment opportunities for both the economy and for workers. The technology companies have contended that their virtual marketplaces, in which people act as contractors and use their own possessions to provide services to the public at the touch of a smartphone button, afford workers flexibility and freedom.

 

Yet labor activists and others have said such roles — with people working as freelancers and having little certainty over their wages and job status — are simply a way for companies like Uber to minimize costs, even as they maintain considerable control over drivers’ workplace behavior . …

 

The classification of freelancers is in dispute across a number of industries, including at other transportation companies. And the debate is set to escalate as the number of online companies and apps like Uber and others rises. Venture capitalists have poured more than $9.4 billion into such start-ups — known as on-demand companies — since 2010, according to data from CB Insights, a venture capital analysis firm, spawning things like on-demand laundry services and hair stylists.

 

”For anybody who has to pay the bills and has a family, having no labor protections and no job security is at best a mixed blessing,” said Robert Reich, former secretary of labor and a professor of public policy at the University of California, Berkeley. ”At worst, it is a nightmare. Obviously some workers prefer to be independent contractors — but mostly they take these jobs because they cannot find better ones.”

Concern that it will inhibit tech startups

But in Media Nama, a popular English-language website focusing on India’s tech economy, writer Riddhi Mukherjee worried about the implications of the California ruling were it copied worldwide:

[Many online] services started of as startups [sic], and the option to bring on board contractors and vendors to provide the service on the ground allowed them to become an Uber or Flipkart. If the California Labor Commission ruling were to become binding, and if online services that act as Intermediaries are forced to directly employ all contractors/vendors, then startups with limited capital will not be able to enter similar businesses. Competition will decline, smaller merchants will find it difficult to find buyers, and they will be negatively impacted.

One writer for the Silicon Beat blog was similarly concerned:

The California Labor Commission ruled that Uber drivers are employees, proving that the agency knows nothing at all about technology. If this ruling becomes the standard government reaction to companies that engage in the sharing economy, there will be no sharing economy of which to speak. …

 

Basically, the ruling is saying that, because Uber doesn’t want you to show up in a rusting hulk that might break down on the way to airport, you are an employee. And basically, the commission is saying that if I rent my house for a weekend on AirBnB, that makes me an employee of AirBnB.

 

Granted, the commission is quick to point out the ruling only applies to Berwick and isn’t “policy.” But you can bet every Uber driver will be gathering Jiffy Lube receipts at this point and filing a similar claim. You can also bet that courts and other labor commissions will be looking at cases like this.

 

Well, if Uber drivers are “employees,” one can make the argument they are owed benefits, insurance, and all other things that usually apply to a full-time employee. If everyone who is a major participant in the sharing economy is considered an “employee,” the business model simply doesn’t work.

Professor: Single ruling has little effect on big picture

But a labor law specialist interviewed by Atlantic Online challenged the idea that the California ruling would have a clear, dramatic effect.

Sam Estreicher, a professor of labor and employment law at NYU School of Law says that while the ruling is important, the fate of Uber and other ride-sharing companies and their contractors and employees may be decided more slowly, on a state-by-state basis, and hinge heavily on the interpretation of labor laws within those jurisdictions. In some places that may mean finding a midway point between employee classification and the current policy, which largely absolves the company of responsibility for its drivers.

Estreicher says that beefed up regulations that bring the companies into compliance with similar, non-sharing-economy companies in each state might be a plausible solution.

Uber is appealing the Labor Commission ruling.

A sharp rebuke

The initial damage to Uber was minimal. The ruling applied to one person, not an entire class, and because Uber immediately appealed, it has not yet had to change the way it does business. Nevertheless, Uber’s business model has been thrown into greater legal question than ever — along with potentially many similar startups. In recent years, the success of the non-employee model has flourished across so many sectors of the economy that “Uber for (fill in the blank)” has become a running joke in tech and media circles.

The CLC did not hesitate to raise broader questions about Uber’s business practices. “While Uber has long positioned itself as merely an app that connects drivers and passengers — with no control over the hours its drivers work — the labor office cited many instances in which it said Uber acted more like an employer,” according to the Times.

In a portentous remark making the rounds online, the CLC said Uber was “involved in every aspect of the operation” performed by its service, not a “neutral technological platform” that allows “drivers and passengers to transact the business of transportation.”

Market uncertainty

That language had the power to hit Uber where it hurts — not in the regulatory field, but in the pocketbook. “Uber’s vast business and multi-billion dollar valuation fundamentally depends on its assumption that drivers are independent contractors, and not employees,” observed a staff writer at Slate. “When drivers are treated as contractors, they carry the bulk of the company’s operating costs. Uber drivers are required to pay out of pocket for everything from gas to insurance to routine car cleanings and maintenance. It adds up fast.” If Uber must bear even a portion of those costs, driving down its profit margins and growth potential, the market’s reaction could be substantial and adverse.

Adding to the uncertainty, however, was the biggest regulatory question raised by the ruling: can the Golden State’s Uber drivers unionize? “They already have an interest group, the California App-Based Drivers’ Association,” as Business Insider noted. “And the group has met with the Teamsters Local 986 in El Monte, California.”

Last August, Business Insider continued, the Teamsters complained that “Uber management flatly refused to sit with members of CADA’s steering committee, and privately stated that it does not, and will not recognize any association that seeks to speak on behalf of drivers” — actions which, the Teamsters said, caused CADA to reach out “for organizational and lobbying assistance.”

A string of setbacks

The CLC’s ruling quickly helped cement the sense that the regulatory tide may be turning against Uber nationwide. Earlier in the year, Reuters reported, a state agency in Florida ruled Uber drivers to be employees. Earlier this month, “Uber lost a bid to force arbitration in a federal lawsuit brought in San Francisco by its drivers. Earlier this year, the same U.S. District Court rejected Uber’s bid to classify its drivers as independent contractors, saying a jury would rule on their status.”

Ironically, Uber and other rideshare services like Lyft had just scored a legislative victory in Sacramento. “After the companies began rolling out a feature allowing multiple passengers to split their fares and be dropped off in different destinations,” the Sacramento Bee reported, “the California Public Utilities Commission said state law would need to be tweaked to allow the option. Assembly Bill 1360 responds to that directive, drawing support both from the companies and from a range of environmental groups. It passed 69-0.” But another bill that would mandate background tests and drug tests for drivers has cleared two committees to date, the Bee added.

Last Thursday, the Assembly Appropriations Committee held in committee legislation that was strongly opposed by ride-sharing companies, drivers and customers. Assembly Bill 24, which was introduced by Asssemblyman Adrin Nazarian, D-Sherman Oaks, would have required ride-share drivers to undergo random drug and alcohol testing and comply with new background check requirements.

Critics said that the bill was an effort to regulate transportation network companies (TNC) out of business and force Californians back into taxi cabs.

Appropriations Committee holds AB24

As part of the normal legislative process, bills that are expected to cost the state money are sent to the Appropriations Committee. Any bill with an annual cost of more than $150,000 is automatically sent to the committee’s Suspense File. After the state budget is presented, lawmakers take up the Suspense File and consider which bills to advance based on available funds.

Nazarian’s legislation, according to an analysis by the Assembly Appropriations Committee, was expected to cost taxpayers nearly three-quarters of a million dollars, as a result of new review processes by the Department of Motor Vehicles and state Public Utilities Commission.

“Given the significant number of current, and probably future TNC drivers, the PUC’s workload will expand considerably,” the Appropriations Committee concluded. “PUC staff currently process by hand vehicle registration information provided by CPCs.”

The new requirement was estimated to cost $680,000 for an IT consultant and new positions to review thousands of initial applications. That cost was enough to prevent the bill from making the Appropriations Committee’s cut.

In addition to costs to the state, ride-sharing companies argued that Nazarian’s proposal for mandatory drug testing was a costly burden on their drivers, a majority of whom are part-time workers. According to Lyft, 78 percent of its drivers work fewer than 15 hours per week. Meanwhile, the average Uber driver logs between 15 and 20 hours per month.

“The California Legislature should embrace companies like Uber, Lyft and Sidecar, who are not only changing the future of transportation, but are driving economic growth and job creation in cities all around the state,” said Robert Callahan, the state executive director for the Internet Association. “A primary reason for the wide-scale adoption of ridesharing by consumers is the enhanced safety experience.”

Uber embraces DMV Pull Notice

Instead of Nazarian’s bill, state lawmakers embraced a plan supported by industry that would enhance safety without undercutting ride-sharing services. Assembly Bill 1422, authored by Assemblyman Jim Cooper, D-Elk Grove, would require companies, such as Uber, Lyft and Sidecar, to use the DMV’s Employer Pull Notice Program. That system notifies companies when a driver gets into an accident or is convicted of driving under the influence, among other notifications.

“The DMV Pull Notice program helps businesses and government agencies ensure that unsafe drivers are taken off the road quickly,” said Cooper, who spent 30 years with the Sacramento County Sheriff’s Department. “AB1422 would improve safety on our roads, particularly for passengers utilizing Uber and other similar transportation services.”

The bill is supported by Uber because it would automate the driver review process for ride-sharing companies. According to Cooper’s office, ride-sharing companies “must manually access DMV records on a quarterly basis to review driving records – a process that is both inefficient and slow to catch such things as DUIs, accidents or license suspensions.” With Uber’s backing, the bill has received unanimous support throughout the legislative process.

Unanimous approval for bill to allow ride-share carpooling

In addition to embracing the DMV’s Pull Notice Program, ride-sharing companies are working with state lawmakers to pave the way for ride-share carpooling.

Last month, the California State Assembly passed legislation authored by Assemblyman Phil Ting, D-San Francisco, that will allow companies to split fares between passengers.

“With climate change accelerating, we must take a hard look at transportation because it is the largest single source of emissions,” Ting said in a press release. “We have long encouraged public transit and carpooling to reduce traffic and air pollution. Extending the environmental mindset to ridesharing requires changing a 50-year-old law. That’s what this is all about.”

Last fall, after ride-sharing companies announced new carpooling services, state regulators sent the companies threatening letters and warned that such programs violate state law, according to CNET.

“In less than a year, thousands of California residents have helped get cars off the road, lessen congestion and improve our environment,” Uber spokeswoman Eva Behrend told the LA Times earlier this year. “Now the California Legislature has the opportunity to embrace this innovation by codifying this service and adopting AB1360.”

Last year, the legislature approved Assembly Bill 2293, which forced ride-sharing companies to abide by new statewide regulations. That law requires companies to carry at least $1 million in commercial-grade insurance and set new minimum levels of additional insurance to be carried by drivers. The bill also ordered the state’s Public Utilities Commission and Department of Insurance to produce a study on transportation network companies before December 31, 2017 – to see how well the new law is working.