A driver and front passenger wear face masks while Uber and Lyft drivers with Rideshare Drivers United and the Transport Workers Union of America in front of the California Labor Commissioner's office amid the coronavirus pandemic on April 16, 2020 in Los Angeles, California. Caravan protest ”.
Mario Tama | Getty Images
Uber and Lyft prevailed in California, and voters backed their Proposition 22 poll.
Prop 22 will exempt these and other gig economy companies from a law that would have forced them to treat drivers and delivery workers as employees. Instead, they can continue to treat them as independent contractors, saving the companies money on employee expenses such as paid sick days, unemployment insurance, and health care.
Uber and Lyft stocks rose more than 10% on Wednesday after projected earnings.
Now companies and workers' representatives will turn their attention to other states that are considering similar labor law changes.
Dara Khosrowshahi, CEO of Uber, has even urged President Donald Trump and US lawmakers to consider "a third way" to classify drivers, similar to what Prop 22 offers, but at the federal level. The proposal allows companies to offer drivers partial benefits, such as a minimum base wage that is above the federal minimum wage and health care grants for some drivers, depending on the average number of hours per week they drive or deliver spend.
Both companies, along with delivery companies DoorDash, Instacart and Postmates, which Uber plans to acquire, poured millions into the $ 203 million support, breaking records for a single campaign initiative in the state. The opposition raised nearly $ 20 million despite the support of Democratic presidential candidate Joe Biden.
Critics point to the spending by ride hail and food delivery companies as a sign of excessive corporate influence. The companies claim they support a measure that many of their own drivers and delivery people support.
After voters intervene, attention will largely turn to policymakers who are considering labor reforms or who have their own AB5-style laws on the books, like New York and Massachusetts.
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What Proposition 22 does and why it won
Proposition 22 is a reprimand for a recent California labor code called AB5, which established a three-part test of whether workers should be considered contractors or workers.
Legislators backing AB5 hoped gig economy companies like Uber and Lyft would classify drivers as employees, forcing them to pay for benefits and unemployment insurance.
Uber and Lyft made changes before the law went into effect to give more flexibility to drivers that they claimed would be compliant. However, the California attorney general sued the companies on the grounds that they hadn't done enough to pass the new job test. A trial judge issued an injunction requiring companies to adhere to the employee classification, even though it should not come into effect until after the election. He called Uber's logic of viewing the drivers' work as being outside the normal course of business, also "a classic example of circular reasoning".
This lawsuit is unlikely to have any meaning after Prop 22 passes, allowing companies to continue operating as they did.
Seth Berenzweig, founder and managing partner of Berenzweig Leonard commercial law firm outside of Washington, said the passage of Prop 22 will be a great win for businesses, especially those with significant operations in California.
"To be honest, some drivers will be disappointed with it. But overall it is a reasonable modern compromise. And it will probably also serve as a new blueprint for other countries," said Berenzweig.
Berenzweig believes that one reason Prop 22 received widespread support was because "People like to be independent. They don't like it when the government shoves a response down their throats". More importantly, he said, companies are adept at finding a middle ground.
The new basic hourly wage under Prop 22 is around USD 16.80, which is higher than the minimum wage under fair labor standards, rules and regulations. This wage rate helped companies pitch.
Berenzweig said it would also be wise to offer a payment to help keep state insurance contributions up. "It helped create the appearance of some sort of middle ground instead of doing what the state did. The state just made an extreme decision and put everyone and everything on a track," he said.
Critics of the measure say it is not that easy. Uber and Lyft drivers, for example, spend a lot of time waiting in their cars for another driver to show up on their phone to be picked up or drive to a nearby stop without paying. Drivers like Nicole Moore, an activist at Rideshare Drivers United, say waiting should be considered work as well. Since the benefits would depend on how many hours the companies worked for them, they could also be changed there at short notice, according to Moore.
"When we are able to get our message out, our message is effective," said Moore.
Independent surveys seem to support company claims that drivers want to be independent. But Moore and labor law experts like Erin Hatton, a professor at the University of Buffalo, say gig company drivers don't always get the full picture.
"You're selling them this dream of being your own boss, working whenever you want, being in control of your work hours," Hatton said. "But they are doing all of these things to undercut the financial security that work could provide them."
Uber did not comment on this article or on Proposition 22. A Lyft spokesperson pointed to a statement accompanying the proposal, which highlighted the long battle over the measurement of the ballot and the benefits associated with it like a guaranteed profit.
Where is the fight going from here?
Companies that support Prop 22 want similar actions elsewhere.
Anthony Foxx, Lyft's chief policy officer, said in a statement the company is "ready to work with all interested parties, including drivers, unions and policy makers, to build a stronger safety net for gig workers in the US."
"Now we are looking ahead and across the country and ready to promote new performance structures that are portable, proportional and flexible," said Tony Xu, CEO of DoorDash, in a statement.
You will likely face similar resistance in New York and Massachusetts as in California. But Hatton said she believed the election measure could set "precedent".
"California is a huge and influential state," she said. "These tech companies, many of which have their origins, are seen as pioneers in the entire sector. And they are literally rewriting labor law, not just for themselves, but I think many other companies will see this and that." try to follow the example. "
Chris Gerace, who drives for Uber and Lyft in upstate New York and writes for The Rideshare Guy blog, has already noted changes the companies have made to include the California AB5. While he said he supports allowing drivers to be independent workers, he would like some of the more flexible roles that Uber has given California drivers to expand across the country.
For example, he says allowing drivers to set their own tariffs could offset the fact that drivers are not paid for the time they wait or travel between trips.
"I don't want an AB5. I don't want an employee model," said Gerace. But he also hopes that drivers, not just companies, will be included in the legislation in his home state.
"These companies themselves shouldn't write this law or proposal," said Gerace.
Regarding California, Moore said she and other activists are unwilling to stop the fight and are ready to take action in court and policy makers.
While California legal options tighten, drivers may still be able to try to reclaim repayment from companies by claiming they were owed for wages they were entitled to while AB5 was in full effect, according to Hatton.
Moore isn't sure if she'll be driving for Lyft or other apps again. She stopped taking drivers in March for health reasons during the pandemic. But even at this point, she said, she already felt that her wages were "almost no longer worth".
WATCH: What California's Prop 22 could mean for tech companies in other states