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US Congress Debates Federal Independent Contractor Model

FreightWaves

After Uber Technologies Inc. (NYSE: UBER) and LYFT Inc (NASDAQ: LYFT) executives failed to appear at a hearing on Capitol Hill at which they were to be chastised for lax safety oversight, lawmakers turned their attention to the merits of making it more difficult for employers to hire independent contractors.

The hearing, held by the Highways and Transit subcommittee of the House Transportation & Infrastructure (T&I) Committee on October 16, focused in part on the need for driver background checks for so-called "transportation network companies," or TNCs, in the wake of homicides and assaults committed by drivers or those posing as drivers.

However, with Uber CEO Dara Khosrowshahi and Lyft CEO Logan Green declining to attend, the committee was given "little choice but to make these policy decisions without [their] input," House T&I Committee Chairman Peter DeFazio (D-Oregon) wrote in a letter to the executives days before the hearing.

"It's hard to imagine that Uber and Lyft didn't actually show up here today – it's really disrespectful to the committee and a bad play on their part," said Thomas Suozzi (D-New York). Suozzi and Chris Smith (R-New Jersey) testified in support of a law they were introducing requiring enhanced vehicle identification to make it more difficult to impersonate a legitimate driver. A college student from Smith's district was killed earlier this year by a person pretending to be an Uber driver.

But in addition to potential legislation addressing public safety for companies like Uber and Lyft, worker classification was also debated, in the wake of California's AB5 legislation. The law, which goes into effect on January 1, lowers the threshold in California for classifying a worker as an employee, which has major cost implications not only for ride-sharing companies but for trucking companies that rely instead on independent contractors.

"I frankly think AB5 was the right thing to do in clarifying the difference between independent and employee," said Representative John Garamendi (D-California) during the hearing. "It certainly affects Uber and Lyft, and it does affect others. We haven't really gotten into this in detail yet as a committee, but we might need to do so in order to write decent legislation. We should have greater clarity on a national level."

Frederica Wilson (D-Florida) who chairs the Health, Employment, Labor and Pensions subcommittee of the House Education and Labor Committee, used the opportunity to promote the "Protecting the Right to Organize Act," a bill introduced earlier this year that would expand the definition of "employee" and "employer" to discourage the classification of workers as independent contractors. It includes language that mirrors the three-pronged "ABC" test in AB5 to determine independent contractor status.

Larry Willis, president of the Transportation Trades Department of the AFL-CIO, testified that the legislation would open the door to union representation, which the International Brotherhood of Teamsters has been attempting to do for years within the port truck drayage sector. "We know union workers across the board do better on wages, benefits and working conditions than their nonunion counterparts, and we think that's an important path forward for these [ride-sharing company] drivers," Willis said.

The debate on whether to elevate stricter tests on independent contractor status beyond California was predictable along party lines, however, with Republicans generally opposing the effort. "I don't necessarily think that this committee should blindly follow the state of California," said Pete Stauber (R-Minnesota). My state is much different than the state of California. It's much more rural, and I think we have to have a broader look at this issue and the transportation network companies, and how we can serve not only urban but rural communities."

Carol Miller (R-West Virginia) worries that reclassifying independent contractors "will take away the flexibility the drivers rely on to drive when they're not at their main job, and will drastically increase the time riders will need to wait for a ride."

DeFazio pointed out that Uber, which reported more than $5 billion in losses in the second quarter, with Lyft reporting losses of $650 million, have asked lawmakers to consider subsidizing their operations if they partner with transit agencies and local governments.

"Overcoming our congestion and mobility challenges, particularly in urban areas, will require some innovative solutions," DeFazio said in a statement. "However, this hearing should put TNCs on notice that for their long-term survival, and for any hope of ever partnering with agencies who utilize federal funds, they are going to have to clean up their acts."

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