California Voters Approve Carveout for Lyft and Uber Drivers from State Labor Law

In this Aug. 20, 2020 photo travelers request an Uber ride at Los Angeles International Airport's LAX-it pick up terminal. Proposition 22 pitted the powerhouses of the so-called gig economy, including DoorDash, Postmates and Instacart, against labor union

In this Aug. 20, 2020 photo travelers request an Uber ride at Los Angeles International Airport's LAX-it pick up terminal. Proposition 22 pitted the powerhouses of the so-called gig economy, including DoorDash, Postmates and Instacart, against labor union AP Photo/Damian Dovarganes, File

 

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Tech companies spent heavily on a campaign for the measure, which labor groups say is flawed. Supporters say it provides a template for “gig worker” regulations in other states.

Uber and Lyft scored a major win in California on Election Day, with voters approving a ballot measure that will allow the companies to go on treating their drivers as independent contractors, instead of having to classify them as full-fledged employees under a state labor law.

The two companies and other tech businesses that depend on so-called “gig workers” dumped about $200 million into the campaign for the ballot initiative. Labor unions backed the opposition campaign, which only raised around $20 million. State figures showed that it was likely the most expensive ballot measure fight ever in California. 

On Wednesday, the measure, Proposition 22, was passing with about 58% of the vote. Opposition to it was heavy in the Bay Area. Preliminary results showed nearly 60% of voters in San Francisco and about 55% across the bay in Alameda County, against the measure.

Prop. 22 does set some new standards for the workers it covers, guaranteeing hourly earnings and per-mile pay toward expenses, funding health benefits for drivers who work at least 15 hours a week and offering medical and disability coverage for on-the-job injuries and illnesses.

Uber and Lyft, along with other technology companies, like Airbnb, have repeatedly pushed back in recent years against state and local regulations they don’t like, with aggressive lobbying and lawsuits. Prop. 22 is a new milestone in those battles, and could foreshadow future debates elsewhere, with proponents framing it as a template for labor laws in other states and possibly at the national level. 

“This vote in one of the most progressive states in the country should send a strong signal to elected leaders all over the nation,” the campaign for the measure said in a statement attributed to Jan Krueger, a part-time Lyft driver who retired last year. “Prop 22 should serve as a model for other states and the federal government.”

Labor advocates and opponents to the measure say it’s an example of industry essentially paying to rewrite a law, and that the protections it does provide to workers don’t go far enough.

“The obscene amount of money these multi-billion dollar corporations spent misleading the public doesn’t absolve them of their duty to pay drivers a living wage … or repay taxpayers for the nearly half a billion these companies have cheated from our state unemployment fund,” Art Pulaski, executive secretary-treasurer of the California Labor Federation, said in a statement. 

Meanwhile, the Independent Drivers Guild, which claims to be the largest gig worker organization in the country and says it advocates for more than 200,000 Uber and Lyft drivers in New York, New Jersey and Connecticut, called on state lawmakers outside California to take action to extend collective bargaining rights to contract workers. 

Brendan Sexton, executive director of the guild, said Prop. 22 leaves gig drivers in California with “no representation, no collective bargaining rights, no path to negotiate a livable wage, and no ability to have a real voice in their pay and benefits.”

Tech companies got behind the initiative after California lawmakers in 2019 passed a landmark labor law, commonly referred to by its bill number, AB 5, that codified stricter guidelines for when businesses had to treat workers as employees as opposed to contractors. 

If workers are reclassified as employees, they stand to gain workplace protections like a minimum wage, overtime pay, unemployment insurance and workers’ compensation insurance, which covers employees injured on the job. But this change also means added costs for employers.

Uber, Lyft and other backers of Prop. 22, like delivery services DoorDash and Instacart, argued the law was incompatible with their business models, and would’ve led to reductions in the number of workers on their apps and less flexible work arrangements for those that remained.

The campaign for the measure also warned that if it did not pass, it would mean higher prices and longer wait times for ride-booking and delivery customers, along with service cuts in some areas.

Opponents to the ballot measure and backers of AB 5 countered that nothing in the law prevented companies from allowing flexible work options. They argued that the companies were resorting to scare tactics to build support for the measure.

Uber and Lyft have struggled to achieve profitability in recent years despite the widespread popularity of their services. The coronavirus outbreak, which has left many Americans going out less and working from home, has hurt ridership this year.

State and local authorities in California have filed a number of lawsuits against Lyft and Uber, as well as DoorDash and Instacart, over worker classification issues. The cases for now remain active despite the passage of the ballot measure.

Bill Lucia is a senior reporter for Route Fifty and is based in Olympia, Washington.

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