In September of 2019, the California state legislature passed Assembly Bill 5. Informally known as the “gig-economy bill,” A.B. 5 aimed to address the challenges faced by people who drive for Uber, Lyft, DoorDash, Instacart, and other similar companies; so-called gig workers, who are classified as independent contractors, do not receive fundamental worker protections, such as guaranteed minimum wage or paid sick days, no matter how much they drive. “We will not in good conscience allow free-riding businesses to continue to pass their own business costs on to taxpayers and workers,” the bill’s author, the assemblywoman Lorena Gonzalez, said, following its passage. Six weeks later, Uber, Lyft, and DoorDash launched a campaign to combat the bill. A spokesperson for the effort told the Los Angeles Times, “We’re going to spend what it takes to win.”
A.B. 5 was written to codify a 2018 California Supreme Court decision that determined, after a thirteen-year fight, that delivery couriers for Dynamex, a nationwide same-day delivery service, were employees and not independent contractors. The court and the law addressed the issue of gig work in a somewhat blunt fashion. Under A.B. 5, a worker must pass a three-point test in order to count as an independent contractor: she must be free from the “control and direction” of her employer, do work that is “outside the usual course” of the company’s business, and have an independent business of her own in the same industry. Those who don’t pass the test are classified as employees and entitled to certain benefits, including a guaranteed minimum wage, workers’ compensation, unemployment insurance, sexual-harassment protections, overtime pay, paid leave, and shared responsibility for payroll taxes.
A.B. 5 was instantly divisive. Certain kinds of workers—doctors, real-estate agents, lawyers, and others—were exempted off the bat, because they often dictate their own fee structures, make more than minimum wage, and have a direct line to customers. But when the bill went into effect, on January 1, 2020, some freelancers, including journalists, photojournalists, composers, and musicians, found themselves out of work. Within a few months’ time, exemptions were granted for freelancers in both journalism and the music industry; since then, more than a hundred other exemptions and limitations to A.B. 5 have been implemented. The law seems to have made a category error, addressing freelance jobs in general rather than gig-work jobs in particular.
Uber and Lyft, the largest ride-hailing firms in California, fought bitterly against A.B. 5, not just in court but through noncompliance. Beginning in January, they simply refused to reclassify their workers, and continued operating as they had before. Last September, Tony West, Uber’s chief legal officer, told reporters that Uber’s drivers could pass the three-point test. “Just because the test is hard doesn’t mean that we will not be able to pass it,” he said, on a press call. “In fact, several previous rulings have found that drivers’ work is outside the usual course of Uber’s business.” Uber, by this logic, is not really a transportation business—it is, as West put it, “a technology platform for several different types of digital marketplaces.”
In the spring, California’s attorney general, Xavier Becerra, along with a number of city attorneys from across the state, filed a lawsuit against Uber and Lyft, ordering them to immediately reclassify eligible drivers as employees. In response, both companies filed an appeal, and then threatened to shut down their operations in California. The court granted the companies an extension until November 4th. The day before, Californians will have voted on a new ballot initiative, drafted and promoted by gig-work companies, that carves out an exception within A.B. 5 for app-based services. The initiative, Proposition 22, is not a referendum on A.B. 5, but a tech-industry-specific exemption. Its goal is to prevent drivers and delivery couriers from being reclassified as employees; it is called the “App-Based Drivers as Contractors and Labor Policies Initiative.”
If A.B. 5 is imperfect, imprecise legislation, then Prop. 22 is worse. In arguing for the new law, the ride-hailing companies have emphasized its inclusion of perks for drivers who work more than fifteen hours a week. Prop. 22 gives them a guaranteed wage that is twenty per cent higher than the legal minimum, occupational accident coverage, and a graduated health-care stipend. But critics have noted that the law has abundant loopholes and weaknesses. Prop. 22 counts working hours in terms of “engaged time,” which includes only the period between accepting a ride and dropping a customer off; time spent driving between rides doesn’t count. Some studies estimate that drivers spend thirty per cent of their time idling, cruising, and waiting for customers. Even if a driver racks up more than twenty-four hours of engaged time each week, the health-care stipend will likely be insufficient to cover even the most basic, out-of-pocket health-insurance plans. Meanwhile, as independent contractors, drivers would not receive the benefits, such as paid sick leave and unemployment insurance, that they would have received under A.B. 5. They would also be on the hook for payroll taxes in their entirety. If they were employees, they would split taxes with their employers. By classifying their workers as independent contractors, Uber and Lyft have saved hundreds of millions of dollars in California payroll taxes. In late 2019, the Labor Center at the University of California, Berkeley, released a report estimating that drivers working under Prop. 22 could receive a net wage as low as five dollars and sixty-four cents an hour—less than half the minimum wage in California, and hardly a third of the minimum wage in San Francisco.
In publicly making their case for an exemption from A.B. 5, Uber and Lyft have claimed that Prop. 22 protects drivers’ scheduling flexibility and ability to work for competitors. Uber and Lyft have said that adapting their software to an A.B. 5-compliant model could be its own time-consuming undertaking, during which service might be suspended—leaving drivers out of work. They’ve also previewed more permanent changes. “Shifting to an employment model would put pressure on Uber to consolidate working hours across fewer workers in order to manage costs that are fixed per employee,” Alison Stein, an in-house economist at Uber, wrote, in a recent blog post. “Under an employment model, it is likely that the new norm for Uber drivers would conform with the 40-hour work week which is the standard for full time U.S. employees.”
Such changes, if they were to happen, would not be mandated by law. Even if drivers’ current flexibility is diminished, A.B. 5 does not mention predetermined shift scheduling; it explicitly allows for part-time work, and for workers to spread their time across competitive services. The real issue is that most gig-work business models are predicated on the availability of low-paid, independent contractors who can be compensated according to algorithmically determined, dynamic pricing. Some analysts have estimated that reclassifying millions of eligible drivers as employees would increase operating costs at Uber and Lyft by twenty to thirty per cent. The companies could be incentivized to limit the number of drivers on the platform or to charge more for rides. Currently, neither company is profitable; earlier this year, when Uber acquired Postmates, an UberEats competitor, it was unclear which service would be the loss leader. The obvious endgame for these companies is monopoly, pursued through low prices: Uber and Lyft want to undercut, and then corner, the market on private-transportation services. This suggests that the fight about Prop. 22 is not just about labor rights. It’s also about antitrust.
During the past few months, the ride-hailing companies—along with DoorDash, Instacart, the Republican Party of California, and others—have spent lavishly on television and radio ads, mailers, and billboards in favor of Proposition 22. The campaign has cited support from Mothers Against Drunk Driving. (Uber has historically been one of madd’s largest donors.) The companies have also endorsed the proposition in their apps, using their direct line to customers to campaign for it. These tactics have been unusual. Uber has sent out “Yes on 22” push notifications, and added a number of in-app modules encouraging riders to vote for the initiative, including a graphic of a car with a speech bubble stating “Yes on 22” that appeared during the checkout flow. Earlier this month, on Uber, a pop-up screen asked drivers to commit to voting for Prop. 22. (The options were “Yes on Prop 22” and “OK”; the language on the pop-up has since changed.) Earlier this month, DoorDash distributed free carry-out bags printed with “Yes on 22” to restaurants, and Instacart handed out stickers reading “Yes on 22” to its fleet of shoppers, instructing them to affix them to customers’ orders.
In total, the “Yes on 22” campaign has received more funding—nearly two hundred million dollars—than any other ballot-measure campaign in California history. The opposition, “No on 22,” has raised about fifteen million dollars. It has the political support of the California Democratic Party; state senators Maria Elena Durazo, Nancy Skinner, and Scott Wiener; various California labor unions; and Bernie Sanders, Elizabeth Warren, Joe Biden, and Kamala Harris. (Harris has been relatively quiet on the issue, perhaps because West, the Uber C.L.O., is her brother-in-law.) Even so, advocates for Prop. 22 have tried to curry favor on the left. In late August, on the anniversary of Martin Luther King, Jr.,’s “I Have a Dream” address, in 1963, at the Lincoln Memorial, Uber launched an advertising campaign in thirteen cities, with billboards that read, “If you tolerate racism, delete Uber.”
Earlier this month, some residents of Southern California received political mailers that looked, at first glance, like progressive voter guides. The fliers claimed to have been prepared and sent by a small handful of organizations with names like “Feel the Bern, Progressive Voter Guide,” “Our Voice, Latino Voter Guide,” and “Council of Concerned Women Voters Guide.” The endorsements were consistent with those by the California D.N.C., with one notable difference: the guides supported Proposition 22. SFGate, a sister-site of the San Francisco Chronicle, published an investigation into the mailers and determined that none of the named organizations are legitimate political organizations. At the moment, Yes on 22 has a slight lead in polls: in late September, a U.C. Berkeley poll of fifty-nine hundred would-be voters indicated that thirty-nine per cent would vote yes on Prop. 22, thirty-six said they would vote no, and twenty-five per cent said they were undecided.
California has a rich history of leading on labor rights, and, in that context, some have referred to Proposition 22 as a bellwether. If drivers become employees, they could form an impressive union; on the other hand, the passage of Prop. 22 could resonate across the country for years to come, inhibiting regulation elsewhere. The law could also serve as a blueprint for future entanglements between Silicon Valley and the political system. One of its clauses states that any future amendments to its provisions will require a seven-eighths supermajority vote of the state legislature. A two-thirds majority is more common for ballot propositions; a seven-eighths majority is unheard of, and audacious. Realistically, if Prop. 22 passes, the only way to alter or repeal it will be through a subsequent ballot initiative. The proposition, therefore, is a power play that favors the sort of political muscle that only comes with vast financial resources. The campaign for Prop. 22 may signal a new stage in Silicon Valley’s fight against regulation. Venture capital has given companies like Uber enough money to rework markets. The same money might rework the law.
*By Anna Wiener via The New Yorker*