Gig companies have long argued that people who drive for Uber or deliver food for DoorDash aren’t employees but rather are self-employed — a vital legal distinction that allows many internet “platforms” to withhold benefits and take other steps to minimize their labor costs. Now, Californians will weigh in on that question by voting on a ballot measure dubbed Proposition 22.
Prop 22 aims to create a permanent “independent contractor” status for platform workers. Critics say the ballot measure allows app companies to underpay and exploit workers. The app companies maintain that without it, they may be forced to raise prices or cut back their services. Here are the issues at stake in the most expensive ballot measure in California’s history.
A giant loophole
An estimated 500,000 people in California work for gig companies, including DoorDash, Instacart, Lyft and Uber. These players classify their workers as independent contractors — essentially self-employed workers who choose when, where and how to work and who pay all their own taxes. Last year, however, California passed a law, AB5, that required gig workers and many other independent contractors to be.
If passed, Proposition 22 would exempt major gig companies from this law. Gig workers who drive or do deliveries would be treated as independent contractors, but would receive a guaranteed minimum wage for the time they are active on a given platform. People who work at least 15 hours a week would also receive a stipend toward the purchase of health insurance.
App workers would get paid 120% of the local minimum wage, plus 30 cents per mile driven. But the payment only applies for time that they are actively working on a given job, such as driving a passenger or fulfilling a shopping order. They wouldn’t be paid for time they spend logged into an app waiting for job requests to come in. Under AB5, by contrast, such waiting time qualifies as paid work, like a cashier waiting for customers to ring up a sale.
“If you’re a barista, you are paid whether or not there’s someone at the counter at the moment,” noted Ken Jacobs, chair of the Labor Center at the University of California at Berkeley. Jacobs analyzed Prop 22 and found its wage guarantee comes out to $5.64 for every hour that drivers are logged into their app. California’s minimum hourly wage is $12.
Who’s the boss?
Opponents of Prop 22 say gig workers are independent contractors in name only: After all, Uber and Lyft set the rules for driver conduct, and the apps’ algorithms determine how they are paid. Drivers do not have the rights of employees, such as paid sick leave, overtime and the ability to form a union.
“Right now we’re not independent contractors,” said Orlando Mims, an Uber driver of six years in San Francisco. “The only good thing we can do is we can log on and log off when we want to. Everything else is controlled by Uber: How many rides we get, if we get a ride or not.”
When Mims started working for Uber, it was initially so lucrative that he left his full-time truck driving job to focus on ridesharing. But the $2,000 to $2,500 a week he used to make has since dwindled as Uber cut driver rates along with bonuses and other incentives it once offered.
The pandemic killed off that income completely. Mims said he contracted COVID-19 in the spring and took several months to recover. Since he resumed driving, customer demand has been nearly nonexistent. Last week Mims said he earned about $100.
“It’s been really slow,” he said.
Mims’s experience is common among many longtime drivers. Between 2013 and 2018, the typical gig driver’s income plummeted 53%, a study from JPMorgan Chase found.
“Don’t screw this up”
Kristina Hope, who drove for Uber for four years before the pandemic, said she was also disappointed when bonuses were cut. Still, she said, “I signed up knowing that there were no benefits.” Hope has been self-employed her whole life — she owned an art consulting business for 30 years before moving to Uber — and said she prefers it.
“If you want another job where you get benefits, then get another job. Don’t screw this up for the rest of us,” she said.
Hope, who lives in Studio City, estimates she earned about $700 on week when she drove 30 hours. But she often worked much less, since she balanced Uber work with a job selling financial services for World Financial Group and traveled often. She doesn’t think she would have control of her schedule as a full-fledged employee.
“The nice thing is being able to drive whenever you want,” she said. “Some weeks I didn’t drive at all. That’s the beauty of it, saying, ‘I’m going to see my mom in Seattle for a week,’ and I didn’t have to ask anyone. That is huge.”
Nothing in California law requires Uber or Lyft to change drivers’ schedule, as the state has pointed out. But because employees are so much more expensive to hire than contractors, defenders of Prop 22 say it’s logical that companies would want more out of drivers.
“No company gives their employees the same flexibility drivers on Uber have,” CEO Dara Khosrowshahi wrote this month. If Uber had to hire its drivers, it would only have room for 280,000 workers instead of the 1.4 million who currently use the app.
For many gig workers, the debate around Prop 22 comes down to quality versus quantity. Those who use the apps infrequently or just to earn extra money tend to rate them much more highly than those for whom driving or delivering goods is a full-time job.
Karen Pyatt is half a year into her first stint as a gig worker. Pyatt signed up for Instacart this spring to deliver groceries for people homebound by the pandemic, and quickly grew to love it, she said. She now shops for others for 20 or 30 hours a week, earning about $300 to $400 that she puts aside for home projects and vacations.
“It’s just extra — it’s not money we depend on,” she said. Pyatt retired from a law enforcement career 11 years ago, and her husband drives part-time for Uber and Lyft. The couple are in their 60s and value being able to prioritize caring for family while working only occasionally, Pyatt said.
“It’s major that we have this flexibility to work where and when we want to,” Pyatt said. “I don’t really want to be on a set schedule unless it’s a schedule I pick, especially after doing government work for 30 years.”
But for Steve Gregg, an Uber and Lyft driver, the arrangement felt like a forced schedule with ever-diminishing returns. When he started in 2017, “It seemed like a decent business decision. I could put in a 40-hour week and make enough to get by, or put in another 10 or 15 hours, and I could do something with my life, take my kids somewhere.”
But as Uber and Lyft cut their pay rates, Gregg found himself working longer and longer hours and depleting his savings. “At the end of the week, with 60 to 80 hours driving, I was struggling to pull $600, $700, after expenses,” Gregg recalled.
The grueling hours, coupled with the coronavirus pandemic, led him to quit this spring.
“One of the things I resented most about Lyft and Uber is they gamed so many drivers,” he said. “Sure, if you’re retired and you only need an extra $20 a week, that’s great. But 80% of the rides, they’re provided by 20% of the drivers, and those drivers are eating bullets.”
An example for others
If Prop 22 passes, other companies are likely to try to make their employees into contractors to save money, experts predict.
“I think you’ll see platform-based companies in other service industries either try to fit themselves into the exception [to AB5], or, if Proposition 22 is successful, try to do the same thing,” said attorney Jason Morris, a partner at law firm Newmeyer Dillion who represents employers.
Platform companies have poured more than $200 million into backing Prop 22 with an all-out publicity push. (Opponents of the measure have given $16 million). Californians have seen TV commercials and received flyers in the mail urging them to vote in favor of Prop 22.
Uber and Lyft have sent a barrage of texts and pop-up notifications via their apps, directing drivers and passengers to vote in favor. In some cases, drivers had to click “OK” or “Yes on Prop 22” in order to access the app, according to reporter Sam Harnett.
Uber drivers sued the company this month, claiming the barrage of notifications amounted to coercion. Instacart told its workers to put pro-22 flyers in shoppers’ orders, according to Instacart shopper Vanessa Bain. DoorDash gave restaurants bags emblazoned with a pro-22 message.
Uber and Lyft previouslyif they were forced to treat drivers as employees. The companies have also said they would raise prices on rides and possibly reduce service if Prop 22 fails.
Still, Californians remain deeply split on the issue. A UC Berkeley poll conducted two weeks ago shows 46% of voters supporting it, with 42% against and the rest undecided.
“It’s just a headache,” said Mims, the Uber driver. “We went through all the protests, we got the legislators to pass a law, we got the governor to sign off on it, and we’re still going through it.”