Written by 8:44 pm Economy

Labor costs for Uber to skyrocket after California Senate passes bill.

The California State Senate has passed a bill that supports the classification of independent contractors as permanent employees. The Senate voted 29 to 11 in support of Assembly Bill 5, which entitles gig workers to the rights of employees. Some of the rights include a minimum wage, workers’ compensation, and health insurance among other benefits. If this bill passes to law, Uber’s labor costs will increase exponentially.

Assembly Bill 5 will proceed to the State Assembly and later the Governor’s office for approval. If it passes into law, companies like Uber and Lyft will incur hefty labor costs on medical insurance and overtime for drivers.

Uber is already cautious of its mounting labor costs after the company laid off 435 workers this week. The company cited a lean design and dipping revenues as the reason behind the cuts.

The probability of the bill passing into law remains high, evident in the state’s assembly prior approval of the legislation. Moreover, California’s governor’s support for Assembly Bill 5 is beyond question. This is evident from his opinion on the importance of protecting low-income workers.

SEE ALSO: Uber sends home 435 workers in its second round of staff cuts.

While the bill’s jurisdiction will be limited to drivers in California, its effect might span beyond its borders. The move might spark interest in other unions to push for similar rights amongst its drivers.

Stiff opposition from Uber

Uber had shown outright objection towards transitioning drivers from independent contractors to full-time employees.

The company put $ 30 million to fund a 2020 bill that helps them maintain drivers as independent contractors. This will save the ride-hailing service additional costs such as overtime benefits as well as health insurance.

In Kenya, Uber drivers protested against its commission rates, which the company responded by providing flexible rates of 25% for the first 15 rides and later 3% for the remaining trips for the week. Additionally, Uber Kenya removed the Uber Select option.

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