Passed by a Democratic legislature and governor, the laws include first-of-their-kind consumer-privacy protections, a change in the way employers classify independent contractors and a cap on rent increases in a state grappling with sky-high housing prices.
For many businesses, the laws will require significant changes to how they collect data on consumers and whether they pay workers overtime or provide paid sick leave, changes that aren’t required by any or most of the other 49 states. But rebuffing the new laws could mean taking a seat outside the state’s booming market, which boasts 39 million people and a gross domestic product of more than $3 trillion.
“Whether you’re doing business that’s headquartered or started in California or not, it’s still major business,” said Kevin McKinley, director of state government affairs for the Internet Association, an industry group that lobbies on behalf of tech companies.
Uber Technologies Inc. and Lyft Inc., both based in California, spent millions of dollars collectively to lobby legislators in 2019, most prominently trying to fight what is known as the state’s gig-economy law. The measure, called Assembly Bill 5, or AB5, took effect Jan. 1 and required employers in many industries to classify their workers as employees except in very limited circumstances, making them eligible for workers’ compensation, overtime and other labor protections.
The homegrown ride-hailing giants—who rely on workers operating as independent contractors and have more drivers in California than anywhere else—have pegged the law as an existential threat. They are employing a three-pronged strategy to escape the law’s provisions, threatening a 2020 ballot measure to exempt themselves, and hoping for a fix in the Legislature. On Monday, Uber and food-delivery company Postmates Inc. filed a lawsuit against the state.
The law would also affect a variety of other industries. Trade groups representing truckers and freelance writers have filed suits against the law and are pushing for new exemptions as legislators open the 2020 session. Hours before the new law was to take effect, a federal judge in San Diego on Tuesday granted a request by groups including the California Trucking Association for a temporary restraining order blocking its implementation for independent truck drivers.
U.S. District Judge Roger Benitez wrote that the plaintiffs were likely to prevail on their claim that the law violates a federal statute passed in 1994 that prohibits any state from passing a law “related to a price, route or service of any motor carrier…with respect to the transportation of property.” The judge, who agreed with the truckers’ claims the state law is likely to cause them “irreparable harm in the absence of relief,” set a date of Jan. 13 for a hearing.
Some lawmakers appear open to tweaks. “The California economy is a diverse and complicated place and there were certain flagrant violators that we were trying to address, for sure,” said Assembly Speaker Anthony Rendon, who added that he is open to considering some changes to AB5. “We’ll look at all of those on an individual basis.”
California’s landmark data-privacy law, passed in 2018, will also present a new challenge for big tech companies. The law gives consumers the right to request that companies collecting their personal data delete the information and stop selling it. The law has broad implications for the advertising industry, which employs troves of personal data collected online.
ig tech companies have so far varied in their responses to the privacy law. Google, owned by Alphabet Inc., has reworked some of its practices to comply. But Facebook Inc. has said that because it doesn’t consider most of its common online activities to constitute sales of data, it won’t change its web-tracking practices.
Privacy activist Alastair Mactaggart is pushing a 2020 ballot initiative to strengthen the law by adding a state enforcement agency, limiting geolocated ads and expanding the ability of consumers to sue when their data is breached.
That uncertainty, Mr. McKinley said, has many tech companies on alert. “Certainly we’re concerned about a patchwork, generally, of laws in states,” he said. “I think there are good arguments to be made that this is not how U.S. privacy law should be set.”
California will also become the first state in the nation to extend health-care coverage to some low-income adults who are in the country illegally. As of Jan. 1, people between the ages of 19 and 26 will be eligible for benefits under Medi-Cal, the state’s Medicaid program, regardless of immigration status. That measure was part of Gov. Gavin Newsom’s first budget last year.
Mr. Newsom is poised to release his newest budget proposal next week.
The new cap on rent increases will prevent most landlords from raising rents more than 5% annually for the next decade and is expected to apply to an additional two million apartments statewide not currently covered by rent control. Apartments built in the past 15 years are exempt, as are most single-family homes.
Some landlords have responded by employing no-fault evictions, a move that will also become more difficult in the new year, and say it could prompt them to raise rents more frequently.
Some officials say more needs to be done—particularly around denser development near transit centers and streamlining of local and state regulations that can slow home construction—to alleviate the housing shortage and combat homelessness.
The latter is a frequent point of contention between state leaders and President Trump, who have sparred over the causes of California’s deepening crisis. In numbers released in December, the U.S. Department of Housing and Urban Development called California the primary driver of an increase in homelessness nationwide. The state experienced a 16% increase in homelessness in 2019, and the increase in its homeless population outstripped numbers in the rest of the 49 states combined.