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Though last year’s passage of AB 5 aimed to guarantee basic labor protections and pay for workers of the gig economy companies, Uber, Lyft, and DoorDash are now fighting back with Proposition 22 on the upcoming November ballot.
Signed into law by Gov. Gavin Newsom, AB 5 eliminated an employer’s right to hire someone as an “independent contractor” instead of as an employee. As an employee, a worker is entitled to certain benefits, such as worker’s comp, unemployment insurance, health insurance, paid time off, and certain protections under the hiring company.
But the aforementioned companies want to stop that. Now, the gig economy companies Lyft, Uber, Instacart, and DoorDash are banding together and funding a $90 million effort to pass a ballot initiative in November to counteract the effects of AB5. Proposition 22 will ask voters to exempt them from the law, allowing them to maintain drivers as independent contractors and provide some modest protections to their workers instead of the more robust rights guaranteed by state labor law — hence overriding AB 5.
Instead of classifying their workers as employees, app-based companies including Instacart and Postmates, as well as the previously mentioned, are proposing granting a specific set of labor and wage policies and keeping them as independent contractors. The companies would guarantee certain benefits such as a net earnings floor, health care subsidies for some, disability benefits if injuries are sustained while driving passengers, and some protections on overtime work, rest periods, and sexual harassment.
Classifying workers as independent contractors instead of employees is argued by many, like the companies and some of its workers, as giving the drivers freedom to set up their own hours, work without management, and overall flexibility.
However, others argue that the companies are actually fighting for millions of dollars in saved tax payouts. The Berkeley Labor Center estimates Uber and Lyft would have contributed $413 million into California’s unemployment insurance fund between 2014 and 2019 had their workers been classified as employees. For example, the companies would be liable for accidents or traffic collisions.
The Protect App-Based Drivers and Services coalition, which receives funding from the three companies, points to the health care stipend and pay floor as evidence that the new hybrid model proposed can provide benefits to workers and financial sustainability to the companies.
According to Stacey Wells, spokesperson for the aforementioned coalition, drivers — as independent contractors— who work 25 hours per week would receive a health care stipend of $367 each month, which is equal to 100% of the average employer payment toward a Covered California Plan. Drivers who work 15 hours per week would receive half of that.
The coalition also claims that the initiative will guarantee drivers receive pay equal to 120% of the hourly minimum wage — $15.60 next year — plus a reimbursement up to 30 cents per mile while driving passengers for an estimated total of $21 per hour.
A report from the Berkeley Labor Center, however, estimates, among other things, that the hourly pay is actually closer to $5.64 hourly due to a number of loopholes, such as lack of payment for waiting time and low-ball calculations on how much to reimburse drivers per every mile with passengers. Wells said the report misrepresents the financial realities of the app-based companies.
Steve Smith, communications director for the California Labor Federation, was quoted saying: “When we allow companies like these to cheat, it not only hurts workers and consumers, but it also hurts businesses that are doing the right thing. It creates a competitive disadvantage to actually following the law… “The ballot measure is nothing more than an effort to get around the law and to spend $100 million to write something that only applies to them.”
Though voters will have to wait until November to vote on Proposition 22, companies like Uber and Lyft are fighting a series of legal battles before election day.
California’s Attorney General, along with the city attorneys in San Francisco, San Diego, and Los Angeles filed a preliminary injunction motion June 24 against Uber and Lyft to immediately halt their classification of drivers as independent contractors. They’re scheduled to argue in court in August.
Earlier this summer though, pro-AB 5 driver groups, for their part, protested outside Uber CEO Dara Khosrowshahi’s San Francisco home to pressure the company to drop the ballot initiative.