Uber (UBER) said it believes that it will be exempt from a new bill passed by California lawmakers on Wednesday that would reclassify thousands of workers as employees, giving them access to full-time benefits and increasing its labor costs in the state. California governor Gavin Newsom has pledged to sign the new bill, known as Assembly Bill 5, or AB5, which would go into effect in January of 2020.
"Contrary to some of the rhetoric we've heard, AB5 does not automatically reclassify any rideshare drivers from independent contractors to employees," Uber Chief Legal Officer Tony West said in a statement. "What AB5 does do is fairly straightforward: it inserts into the California labor code a new legal test that must be used when determining whether a worker is classified as an independent contractor or an employee."
Uber's stance is that previous rulings have found that its drivers' work is actually outside of the usual course of Uber's business, which is the new legal test being applied in California. Uber instead sees itself firstly as a tech company.
Because of that, Uber said it will not automatically reclassify its drivers as employees even after January, when AB5 goes into effect.
Uber and Lyft (LYFT) have also put $60 million into a campaign committee account as they consider putting forth a statewide ballot initiative in 2020 that would allow them to continue to classify their drivers as contractors but establish an "earnings floor."
In an article published on Wednesday, California Governor Gavin Newsom said he's committed to continue negotiating with Uber, Lyft and other so-called gig economy companies on some kind of compromise, regardless of what happens with AB5. Those remarks helped send Uber and Lyft shares up higher on optimism that a deal would be reached.
Uber shares closed Wednesday's session up 1.34% while Lyft shares climbed 2.73%.