OAKLAND, California – Drivers and other workers for gig economy companies in California are not becoming their employees.
California voters brought Uber and Lyft to victory and overwhelmingly voted in favor of Proposition 22, an electoral measure that allows gig economy companies to continue treating drivers as independent contractors.
Uber, Lyft, and delivery service DoorDash designed the measure to exempt companies from a state labor law that would have forced them to employ drivers and pay for health care, unemployment insurance, and other benefits. As a concession to the workers' advocates, the initiative offers drivers a lower wage limit and limited benefits.
The Associated Press predicted early Wednesday that Prop. 22 would receive 58 percent of the vote. Prop. 22 was more than 19 points behind the strongest opposition in San Francisco, where Uber and Lyft have their headquarters.
The vote unleashes the most violent regulatory battle Uber and Lyft have faced and opens the way for companies to reshape labor laws across the country. The working groups and state lawmakers are fighting startups that have spent $ 200 million in support of the measure.
When voting in support of Uber and Lyft, the Californians opposed the principles set out in a 2018 Supreme Court ruling and enshrined in 2019 state law that workers perform the duties of a company's regular business – and controlled by the company and not operating their own companies – must be treated as employees. According to Prop. 22, gig workers are exempt from these rules and can continue to work independently.
The Yes on Prop. 22 campaign, supported by Uber, Lyft and DoorDash, celebrated the victory. "California has spoken," said Geoff Vetter, a campaign spokesman, in a press release. "Support. 22 represents the future of work in an increasingly technology-driven economy."
Uber's stock rose nearly 3 percent on Tuesday as surveys suggest Prop. 22 would likely pass. Lyft's stock also rose 7 percent.
Uber's managing director Dara Khosrowshahi thanked the drivers for the victory in an email until late at night. "The future of self-employment is more secure because as many drivers as you have spoken," he wrote. He said Uber will make the new benefits promised by Prop. 22 available "as soon as possible."
"The past 14 months in California have been the most critical point on this issue," said Bradley Tusk, a venture capitalist who advised Uber on policy issues during its early years. Encouraged by the elections, Uber and other gig economy actors are likely to pursue federal laws to formally anchor gig work in the country's labor laws.
The passage of Prop. 22 is a bitter loss to state and local officials, who have long viewed the hail-fighting companies as stubborn upstarts who shook off any effort to get them to obey the rules.
Many local officials believed California was being too gentle when it came to regulating Uber and Lyft for too long and naive about how powerful and influential the hail-fighting companies were fast becoming.
"Uber and Lyft have relied on the shyness of officials across the country for too long," said San Francisco city attorney Dennis Herrera. Mr Herrera has sued Uber and Lyft for forcing them to hire their drivers and the lawsuit continues. "They said," We're not going to ask for permission, we're going to ask for forgiveness after the fact once the horse has left the stable. "
Uber and Lyft started with just a handful of drivers in the early 2010s and looked more like carpooling than professional fleets. While Uber initially attempted to mimic black car services, Lyft was quick to advocate that the novelty of gig work, rather than the promise of traditional employment, attracted drivers to the apps.
Transit officers and taxi companies warned that drivers did not have professional certification and would not be subjected to background checks. Uber and Lyft argued that they were primarily technology companies, not transportation companies, and shouldn't be forced into the onerous requirements of licensing, security clearance, and employment. The California Public Utilities Commission stepped in and set basic safety requirements, but allowed Uber and Lyft to avoid hiring drivers.
Even so, the employment problem persisted. By 2015, the state labor commissioner ruled that drivers were "an integral part" of Uber's business model, but the ruling allowed only one driver to be classified as an employee.
Still, three years later, the California Supreme Court reached a comprehensive and unanimous decision in a case known as Dynamex. According to the tripartite employment test proposed by the court, Uber and Lyft drivers appeared to be employees rather than contractors.
The ruling sparked concern among gig economy companies, but they made no attempt to reclassify their workers. Lawmakers saw an opportunity to regulate a defiant industry.
"The problem is this: Uber and Lyft neglected not just labor laws, they neglected every law in the book," said Lorena Gonzalez, a member of the California Congregation that drafted the state's new labor law. "The only reason we A.B. 5 is because of Dynamex. The Supreme Court created such a clear rule. It freaked out the business as much as it boosted work. "
In September 2019, the state assembly approved Ms. Gonzalez's bill, and the law went into effect in January.
Under the new law, Uber and Lyft drivers were employees. But nothing has changed. The companies continued to treat them as independent contractors and vowed to put their struggle to the vote. In May, Mr Herrera, along with the attorney general and Los Angeles and San Diego attorneys, sued Uber and Lyft to enforce the law.
When the court ordered companies to cease their drivers immediately, Uber and Lyft threatened to shut down in California instead of sticking to it. They also put millions more into the election campaign, making Prop. 22 the most expensive initiative in the history of the state. An appeals court granted Uber and Lyft a small amount of redress to allow them to comply with the order for several months.
Although the lawsuit continues, Prop. 22 will drastically reduce its scope. The state will continue to seek penalties between January and the confirmation of election results if it says Uber and Lyft have broken the law.
"They look back and say I wish it didn't have to happen that people started obeying the law," Herrera said. "I thought it was important to fight for workers 'and consumers' rights."
With the gig work model cemented in California, Uber and other gig economy companies are expected to pursue federal laws that protect them from similar labor laws in other states.
The passage of Prop. 22 is a backlash in years of efforts to regulate tech giants like Uber, but it comes from the increasing eagerness of lawmakers and federal officials to adopt big tech. Members of Congress from both parties support crackdown on social media companies and the fight against Amazon and Google. Uber and his gig economy peers could get caught up in this anti-tech sentiment.
"We can't just allow them to control what the future of work looks like," said Ms. Gonzalez. "Someone has to stand up for the future of workers."