Uber Technologies Inc. and Lyft Inc. have long defended their “gig worker” business practices in the face of local crackdowns, class-action lawsuits and the scrutiny of going public, but their home state of California could finally push them to make some concessions — or blow up their business model.
California has been trying to force Uber
and other gig-economy companies to follow state labor laws, which would classify most of their drivers as employees rather than independent contractors. In August, a judge ordered Uber and Lyft to immediately comply with the law, a decision the companies are appealing.
See: Uber and Lyft must make drivers employees because California law has ‘overwhelming’ edge, judge says
The gig companies have spent more than $185 million in an effort to exempt themselves from the law by way of Proposition 22, which California voters will consider Nov. 3. Uber, Lyft, DoorDash, Instacart and Postmates have greatly outspent the opposition, made up of labor unions, the state Democratic party and others, which has raised about $10 million.
Uber, Lyft, DoorDash and other gig companies have outlined in the measure additional wages and benefits for drivers and couriers, which gives other states a potential path to follow as worker protections grab the spotlight during a pandemic and economic crisis. If the proposition fails and Uber and Lyft reorganize their businesses to follow the law instead of leaving California, as they have threatened, it gives everyone a glimpse at what the companies could expect to deal with elsewhere.
“What happens here is terribly important to many states… which are considering such legislation,” said William Gould, professor emeritus at Stanford Law School and a former chairman of the National Labor Relations Board. He added that the impact could be nationwide because former Vice President Joe Biden has expressed opposition to Prop. 22; if he wins the presidency, his administration could “seriously consider” putting the same standard on worker classification that California has adopted “in the National Labor Relations Act itself,” Gould said.
The key issues as the proposition goes before voters are wages, benefits, flexibility and insurance. Uber and Lyft have long touted the flexibility that gig work provides and say reclassification would end that; critics say the gig model pushes the onus for protections, such as health-care benefits, on the workers without paying them enough to allow them to afford to cover those costs, and that the measure would essentially lock in subpar wages and benefits and preclude workers from organizing.
See also: The different routes Uber and Lyft could take as they fight California law
Here’s a breakdown of how Prop. 22 addresses or fails to address the key issues.
This issue is at the heart of the gig companies’ argument that workers need to remain independent contractors. Prop. 22’s backers claim that drivers “overwhelmingly” want to be contractors because they want the flexibility to work whenever they want, citing an Edelman study that found 72% of drivers want to be contractors.
That study was commissioned by Uber, however, and other evidence that drivers wish to remain contractors also has the scent of the big money that companies are putting behind the measure. Television ads and campaign mailers feature workers who tout the flexibility gig work gives them, but they have been paid for their endorsements anywhere from $500 to a couple of thousand dollars by the “Yes on 22” campaign, according to publicly available state records.
The initiative’s opponents point to studies that show most ride-hailing drivers actually work full time. One such study, by the UC Santa Cruz Institute for Social Transformation and community advocacy groups, found that of a representative sample of different types of gig workers in San Francisco, 71% worked more than 30 hours a week; 50% worked more than 40 hours; and 30% worked more than 50 hours.
Chris Benner, a UCSC professor, lead author of the study and director of the Institute for Social Transformation, pointed out that according to his findings, the companies’ services “depend on those who are working full time or more, and for whom [their earnings are] the majority of their income.”
From 2018: Drivers’ earnings fell by more than half, study finds
That’s in line with studies elsewhere. A 2018 UCLA Institute for Research on Labor and Employment study found that almost half of ride-hailing drivers in Los Angeles drove 35 hours or more a week. Another study by two economists, which focused on Seattle and was commissioned by that city, found that a third of drivers surveyed drove more than 32 hours a week and provided 55% of all trips.
The companies “know their services depend on that core workforce,” Benner said. “There’s no reason voters should be weighing in on this issue for a tiny minority of [the gig companies’] workforce. This is a complex issue of labor law that’s appropriately dealt with by legislators and the courts.”
If gig companies were forced to treat their drivers and couriers like employees, would that mean they would no longer be able to work when they want, or for multiple app-based platforms? The companies say yes.
In a blog post last week, Uber Chief Executive Dara Khosrowshahi warned that about 900,000 of his company’s drivers around the nation — about 500,000 Uber and Lyft drivers are in California — could lose their ability to work if they have to be considered employees. He added that as an employer, “Uber would be forced to actively manage drivers’ schedules, hiring a specific number of employees based on a baseline volume of consistent business.”
Labor experts disagree. Michael Reich, a UC Berkeley professor and one of the economists in the Seattle driver-wage study, also did a similar study for New York drivers. Both studies found that about half of the drivers worked for more than one app.
The companies “could hire some of their workers on a part-time basis, as most companies do, and they can schedule short-time shifts in advance, as many delivery companies do,” Reich said. “I don’t understand the companies’ claim that this would not be possible.”
Another UC Berkeley professor, Catherine Fisk, who teaches labor and employment law, feels the same way. “There is nothing in the law that requires workers to work a fixed shift,” she said. “Uber saying that is like saying the Earth is flat.”
Jon Wong delivers for DoorDash in the Bay Area, about 12 to 15 hours a week in addition to his full-time job. He thinks gig companies are bluffing about getting rid of a lot of the part-timers if they are forced to classify them as employees. But if he lost the ability to make the extra money — he averages about $12 an hour without tips — he said, “I would be OK, given that all workers should have proper wages and benefits.”
The gig companies say Prop. 22 will guarantee that drivers and couriers earn at least 120% of minimum wage, which is currently $13 an hour in California for companies with 26 employees or more. Opponents say the proposed wage guarantee doesn’t necessarily mean drivers would earn the minimum wage because they are only paid during “engaged” time, meaning when they are driving — not while they’re waiting for a fare or a gig, which according to one estimate can be for up to 37% of the time they’re logged in.
Estimates of how much drivers would make an hour, after expenses, vary widely and can be hard to calculate. They range from as little as $5.64 an hour (according to the Labor Center at UC Berkeley) to $25 to $27 an hour (according to a study by UC Riverside School of Business Center for Economic Forecasting and Development, which was commissioned by Uber and Lyft).
Edan Alva, a Lyft driver in Alameda, Calif. and an organizer with Gig Workers Rising, said his pay has fallen considerably over the six years he has been driving. He stopped driving in April because of the pandemic, at which point he said he was making an average of $5 an hour.
Two major cities, both outside California, have established minimum wages for ride-hailing drivers. In New York City, drivers take home at least $17.22 an hour after expenses under a law adopted last year, while Seattle’s mayor last week signed a law that applies the city’s minimum wage of $16.39 an hour to drivers. Prop. 22 would preclude localities from establishing standards such as those.
For more: Is the gig economy even working?
Because drivers would not be considered employees under Prop. 22, they would not be entitled to overtime for working more than eight hours a day or more than 40 hours a week.
Another thing that will affect workers’ take-home pay: The initiative has a provision for mileage reimbursement of 30 cents a mile, which is considerably less than the standard IRS rate of 57 cents a mile.
Health benefits and paid leave
Prop. 22 would provide workers with subsidies for health benefits depending on the number of hours they work a week. If they work 15 to 25 hours a week, they would get 50% of the average Affordable Care Act contribution for the average monthly Covered California premium, and would get up to 100% of the average contribution if they work more than 25 hours a week.
Opponents point out that the stipend for health benefits would only be available to workers who already have a qualifying health-care plan, and that even so, the benefits offered are limited and, like in the case of the wage guarantee, would be based on engaged time instead of total time working.
Sixty-one percent of workers surveyed in the UC Santa Cruz study said in April — amid the COVID-19 pandemic — that they most urgently needed health-care benefits. In addition, 54% of those surveyed said they most urgently needed sick pay. Prop. 22 offers no paid sick or family leave, while state and federal laws require California employees to receive both.
Alva said in January that he felt ill for a week with flu-like symptoms. “On the first day, I kept working because I had to pay rent,” he said. “Then I pretty much crashed for a week in bed, but didn’t go to a doctor because I couldn’t afford it. That was before the coronavirus.”
Disability and unemployment insurance
Prop. 22 says workers will be provided with disability coverage, but opponents note the coverage will be limited to 104 weeks. That falls short of what California employees are entitled to under federal and state law, which is lifetime coverage.
Employees are also entitled to unemployment insurance, which Prop. 22 does not address. As demand for ride-hailing tanked because of the pandemic, especially at first during stringent shelter-in-place orders, drivers lost income. They filed for unemployment, and some of them, including Alva, eventually received some money to help tide them over — money that was paid for by taxpayers because the gig companies have not paid anything toward drivers’ unemployment insurance, as other employers are required to do for their full-time workers.
In fact, in March as lockdowns began around the nation, Uber’s CEO wrote to President Donald Trump and lawmakers, urging them to include drivers in economic-stimulus considerations — something critics said amounted to asking for a bailout of companies like Uber and Lyft.
“The business model of companies that relied on large numbers of independent contractors shifts all the risk of an economic downturn to the workforce,” Fisk, the UC Berkeley professor, said. “That has tremendous consequences for the workers and for the public when the economy turns bad.”