California’s new gig work law, which takes effect in January, sought to prod Uber and Lyft to turn their drivers from independent contractors into employees.
It could hit the taxi industry instead.
Taxi drivers are generally contractors. While many say they might benefit financially by making minimum wage and overtime plus benefits, they also fear their industry is so financially precarious that the additional expenses could make it collapse.
“If we weren’t struggling to stay afloat, I would probably support AB5 for taxi drivers,” Marcelo Fonseca, a longtime San Francisco driver, said of the gig-work law. But “in this current market, AB5 will probably bankrupt the taxi industry.”
It’s possible that taxi drivers could be reclassified under AB5, said bill author Assemblywoman Lorena Gonzalez, D-San Diego, a former labor leader who organized cabbies in San Diego.
“There need to be changes in how the industry operates,” she said. “We all helped create a problem and massive misclassification in the taxi industry. Then we exacerbated the issue by never regulating Uber and Lyft.”
Gonzalez said it should be up to each city to figure out, because taxis are controlled at the municipal level. “This is a local problem, and we need to hold local governments accountable for fixing it,” she said.
AB5 says workers are employees unless they control their own working conditions, do work that’s not central to a business’ mission, and have independent enterprises doing that type of work.
The law won’t trigger automatic reclassification. Lawsuits by government agencies or individual drivers would be the likely path for that.
The San Francisco Municipal Transportation Agency, which oversees taxis in the city, has no plans to pursue employee status for drivers, said Kate Toran, director of taxis and accessible services. San Francisco has 3,777 licensed taxi drivers and 1,426 medallions, the permits for operating a cab. Drivers who are not medallion holders pay a daily fee to a cab company or individual medallion owner to rent a cab and medallion.
“There are so many unknowns that it’s too speculative to comment” on what the ramifications would be of drivers becoming employees, Toran said.
But drivers and cab companies are already weighing the what-ifs.
Mark Gruberg, a cabdriver since 1983 and a medallion holder since 1999, said he makes less than San Francisco minimum wage of $15.59 an hour from fares after expenses, although tips sometimes bump it higher. He works with Green Cab, a cooperative of about 18 drivers with six medallions.
“My feeling is that cabdrivers would be better off as employees, to have the rights of a guaranteed minimum wage with tips on top of that, to have benefits, to have a say in their conditions of work,” he said.
But realistically he doesn’t think cab companies can afford that. The only way taxi-driver employment would work, he said, is “if there were a level playing field (of regulations) with Uber and Lyft so the taxi industry could fairly compete.”
Uber and Lyft don’t intend to reclassify their drivers, despite the law. They are pursuing a 2020 ballot initiative to allow independent contractor drivers to receive some benefits and minimum earnings guarantees. Uber says it will battle reclassification in court.
“The supreme irony is that these companies with their billion of dollars in venture capital can fight this off, and probably prolong that fight for a very long time, whereas the taxi industry may be subject to this on very short notice,” Gruberg said.
“If the taxi industry has to absorb employee status while Uber and Lyft get a pass because they go to the voters or drag it out in the courts for years, this could be our death knell.”
San Francisco cabbies were unionized employees until the late 1970s when an earlier incarnation of Yellow Cab, the dominant operator, collapsed, and the city passed Proposition K, mandating that individual drivers, rather than companies, receive medallions at a nominal fee in order of seniority. In 2010, the city started selling medallions for $250,000. Many drivers now say their medallion loan payments are crippling and want the city to repurchase the medallions.
“When I started (in 1973), we were employees,” said Ruach Graffis, a driver for 40 years who’s now retired. She recalled being limited to eight hours of work plus an hour of breaks so as not to rack up overtime expenses for the cab company.
“When we became independent contractors and got 12-hour shifts, that was a huge relief on a stress level, but of course no benefits,” she said. “We couldn’t organize into a union anymore.”
Graffis said she thinks that many drivers would resist an employment model, because the job tends to attract people who are independent.
Peter Miller, a driver who now mainly does training and office work at Yellow Cab, is on the board of the San Francisco Taxi Workers Alliance, representing scores of drivers, “as close to a union as taxi drivers in San Francisco can get,” he said. (Under federal law, independent contractors cannot unionize.)
Employment status “has the potential to kill off the taxi industry,” he said. “The cab companies just couldn’t absorb all those extra expenses all of a sudden.”
Cab companies are busy pondering strategies. San Francisco’s two dozen fleets are already undergoing consolidation, as smaller operations are absorbed by bigger ones.
Hansu Kim, who runs Flywheel Taxi, the city’s second-largest fleet, operates a hybrid model, in which about two-thirds of its 300 cabs are owned and operated by medallion holders who pay a monthly fee to use Flywheel’s dispatch system and colors. The owner-operators drive the cabs themselves and also rent them to other drivers.
The more traditional model is called “gas and gate.” A cab company leases medallions, and then provides a medallion, a cab and accident insurance to each driver, who pays the company a “gate” fee of about $80 to $100 per shift plus fuel.
“Come Jan. 1, we will transition to no longer owning vehicles,” Kim said. “We are literally changing the way we operate so we just provide services to independent drivers who have their own vehicles” and medallions.
By working only with medallion holders, Flywheel hopes to avoid being considered an employer, he said.
Yellow Cab, the city’s largest fleet with more than 500 cabs and about 1,100 drivers, is making similar calculations.
Employing its drivers “would drive up the cost dramatically for everybody that uses our service,” said CEO Chris Sweis. “There’s a possibility of going to a purely owner-operator model, where guys who own medallions would have their own cabs. We could be forced into that model.”
He thinks the fleet size would shrink in either case, and that some drivers might leave the industry altogether.
One question is whether medallion owners who rent out cabs to other drivers would be considered employers. Medallion holders say they’re ill-equipped to take on that responsibility.
AB5 could be a positive force for the industry in California, said Bhairavi Desai, executive director of the New York Taxi Workers Alliance, which represents about 22,000 drivers of cabs, ride-hail cars, livery and black cars in New York City. The San Francisco Taxi Workers Alliance is its affiliate.
“In crisis there are opportunities,” she said. “This is a moment that the taxi industry could be restructured.”
For instance, she said, medallion holders could organize into co-ops, offering dispatch, colors and insurance to drivers the way cab companies do now.
“Employment should be seen as an opportunity to improve conditions and stabilize the workforce and the industry, not another nail in the coffin,” she said.