Gig companies just launched a $90 million campaign to escape California’s crackdown on the gig economy.
The Protect App-Based Drivers & Services campaign, funded by Uber, Lyft, and DoorDash, will file paperwork on Tuesday to put a referendum on California’s 2020 ballots. The ballot measure will ask voters to give ride-hailing companies an exemption to AB 5, a landmark state law passed in September that outlaws many aspects of the gig economy.
AB 5 requires companies to hire workers as employees, not independent contractors, with some exceptions. That would likely give hundreds of thousands of California workers — including Uber drivers and other gig workers who are classified as independent contractors — basic labor rights and benefits for the first time.
These companies really, really don’t want to do that. Hence the attempt to carve out an exemption for app-based driver contractors.
During a press conference announcing the ballot initiative in Sacramento on Tuesday, it wasn’t company executives who made the case to free Uber and Lyft from complying with AB 5. Instead, the campaign organized an odd coalition of ride-hail drivers, a state chamber of commerce official, and the founder of Fathers Against Drunk Driving.
“Our ability to maintain the flexibility of our work is at risk,” said Akamine Kiarie, one of several dozen ride-hail drivers who participated in the event. “This new law would force us to work as employees.”
As part of the ballot initiative, ride-hailing companies promise to pay drivers at least 20 percent more than the minimum wage, plus 30 cents per mile to cover wear and tear on their vehicles. The companies would also pay drivers a small stipend to cover health care costs and to provide them with accident insurance. This is better than what drivers get now, but far less than what they would get as employees.
Meanwhile, news of the ballot initiative triggered the ire of thousands of ride-hail drivers in the state who do support AB 5.
“After working 80 hour weeks, sleeping in our cars and surviving on poverty wages, drivers organized and won support for AB5 from both the public and lawmakers. Now, instead of obeying the law, Uber, Lyft, and Doordash want to spend $90 million to avoid accountability— all while claiming it will ‘protect’ drivers,” wrote Lyft driver Edan Alva in a statement shared with Vox. Alva is one of 20,000 ride-hail drivers in the state who make up the We Drive Progress Coalition, a group of grassroots organizations that represent app-based drivers.
Labor unions also slammed the move, calling it a “corporate Hail Mary.”
“No corporation should be above the law, no matter how much they spend on political campaigns to rig the rules in their favor,” said Art Pulaski, executive secretary-treasurer of the California Labor Federation, in a statement to Vox.
The ballot initiative comes as no surprise. Gig companies had warned lawmakers about their plan before Gov. Gavin Newsom signed AB 5 into law. Their decision to move forward with the referendum shows just how far tech companies are willing to go to avoid government regulation — and to avoid giving workers basic rights.
California’s AB 5 bill, explained
The California bill, known as AB 5, expands a groundbreaking California Supreme Court decision last yearknown as Dynamex. The ruling and the bill instruct businesses to use the so-called ABC test to figure out whether a worker is an employee. To hire an independent contractor, businesses must prove that the worker a) is free from the company’s control, b) is doing work that isn’t central to the company’s business, and c) has an independent business in that industry. If they don’t meet all three of those conditions, then they have to be classified as employees.
That is a much clearer — and stricter — standard of proof than the vague guidelines under federal law. And it’s one of the biggest challenges yet to the profit model of Uber, Instacart, Postmates, and other tech companies that rely on a small army of independent contractors. Uber likely will have to reclassify tens of thousands of drivers in California as employees, something Uber drivershave been fighting for in court, unsuccessfully, for years.
Since the bill passed the state assembly in May, California businesses had been panicking over the possibility of it passing. The state’s Chamber of Commerce and dozens of industry groups lobbied for exemptions, and a long list of professions was excluded from the bill: doctors, dentists, lawyers, architects, insurance agents, accountants, engineers, financial advisers, real estate agents, and hairstylists who rent booths at salons.
Uber and Lyft, in particular,had been lobbyingfor an exemption to the bill in the Senate. They even begged in public for a compromise. The companies hoped to keep treating drivers as contractors, and in exchange, they promised to set a minimum pay rate for drivers while they’re picking up and dropping off passengers, create a company-backed fund for benefits like paid time off, and establish an association for drivers to advocate for further improvements.
Drivers who had been organizing in support of AB 5hit backwith their own messaging, saying nothing in the law would stop the companies from offering schedule flexibility to employees.
That didn’t stop Uber and Lyft from ramping up their campaign to get an exemption. In August, before the bill passed the state Senate, Uber and Lyft emailed drivers and passengers in California, begging them to contact their lawmakers to urge them to compromise.
“Help protect rideshare in California,”read one messagesent to Lyft customers on August 28.
It didn’t work.
Ride-hailing apps have done everything to keep drivers as contractors
When Uber drivers wenton strike across the worldin May, much of their frustration had to do with their lack of power as independent contractors.
Uber’s profit model, like that of other companies in the gig economy, depends onall the money savedfrom skirting US labor laws.
By classifying drivers asindependent contractorsinstead of employees, Uber hasn’t needed to pay certain taxes, benefits, overtime, or minimum wages to tens of thousands of drivers. As self-employed contractors, drivers haven’t had a legal rightto form labor unionsor negotiate contracts.
That may finally be changing.
Uber drivers have spent more than six years fighting the company in court, saying they’ve beenintentionally misclassified. They argued that drivers should be considered employees because the company has so much control over their workday, including strict rules on their vehicle conditions, what rides they can take, and which routes to use.
Over the years, Uberhas refused to reclassify drivers, maintaining that drivers are not employees because they set their own schedules and provide their own cars.
However, in May, Uber settled the main court case with13,600 Uber drivers, agreeing to pay them $20 million but without changing their status as independent contractors. The other 350,000 drivers who were part of the initial class-action lawsuit had signedmandatory arbitration agreements, so a federal judge is requiring them to pursue their cases in a private forum, where they are less likely to win their case.
But it will be hard for Uber to pass the ABC test that will soon become law; driving people around in cars is a central part of the company’s business. Any challenge to the drivers’ status as contractors threatens Uber’s bottom line, which is another reason the bill is so significant.
AB 5 doesn’t go into effect until January, and even when it does, Uber and Lyft have vowed to keep doing their thing, saying that they will continue to treat their drivers as contractors.(Uber continues to claim that its drivers aren’t core to its business and so the law doesn’t apply to them.) While Lyft hasn’t given as much rationale, it’s also said that it plans to continue classifying drivers as contractors.
A legal battle is already playing out in California courts. Uber drivers have recently filed lawsuits against the company, seeking damages and to force them to comply with AB 5, and city attorneys may start doing the same. But as Uber’s chief legal officer said on a press call last month, the company is “no stranger” to legal battles.
While Uber and Lyft fight AB 5 in court, they’re hoping voters will believe that most drivers want to continue working as contractors, and that they deserve a break from AB 5. But with 20,000 drivers organizing against the campaign, that’s a hard case to make.