The two biggest names in ridesharing are spending almost $100 million to overturn a California state law that requires them to classify their drivers as full-time employees.
At stake is over $392 million in potential annual payroll taxes and workers’ compensation expenses for ridesharing giants Uber and Lyft – which includes providing their drivers with health coverage and unemployment insurance.
According to Reuters, both companies are spending nearly $100 million to support Proposition 22 – a ballot initiative that aims to overturn California Assembly Bill 5 (AB5), which took effect in January. AB5 places more limits on who companies can classify as “independent contractors” – a move that Uber and Lyft contest, saying that it will ultimately lead to higher prices down the line and could force them to exit the California market.
In an analysis based on a study on driver pay from Cornell University, Reuters found that each driver classified as full-time employee driver would cost Uber an extra $7,700 in federal payroll taxes and workers’ compensation insurance on average.
“Today, drivers have control over when, where, and how they work,” said Tony West, chief legal officer at Uber. “They can choose to work for any of our competitors at the same time, and many do. In the US, 92% of drivers drive less than 40 hours per week, and 45% of drivers drive less than 10 hours per week. This would all change dramatically if they were employees. We will continue to defend the innovation that makes that kind of choice, flexibility, and independence a reality for over 200,000 drivers in California.”
With the outcome in California having the potential to reverberate throughout the United States, it has also unsurprisingly become an election issue, with Democratic presidential candidate Joe Biden tweeting his support for AB5, which he said “will give workers the dignity they deserve in the workplace,” adding that we “can’t let corporations undermine basic rights by adding these exemptions to ground-breaking legislation.”