Ride-sharing firms successfully lobby users to pass ballot measure
Last week, California voters overwhelmingly approved a measure that allows ride-hailing companies to continue treating drivers as independent contractors rather than employees. The news is a big win for businesses in the so-called gig economy in the US state.
In 2019, we wrote about how a proposed California law threatened business models based on freelance workers (see Labour Laws versus the Gig Economy). At the time, the passage of the Assembly Bill 5 rule looked like an existential crisis for the likes of Uber and Lyft.
A year later, California voters have approved Proposition 22, a ballot measure funded by Uber, Lyft, Postmates, DoorDash and Instacart, which together spent $200 million on the campaign. The measure excludes drivers from Assembly Bill 5, meaning that they’re not classified as company employees. As employees, they would be entitled to an hourly minimum wage, overtime and sick pay, as well and unemployment and workers’ benefits.
Instead, Proposition 22 promises drivers a guaranteed minimum pay rate while they’re assigned a task, a review process for terminations and health stipends if they work enough hours. It also makes it very difficult for collective bargaining by drivers on wages or benefits, although this may face a constitutional challenge.
California was essentially the first state to launch the gig-worker model when Uber and Lyft started in the early 2010s with only a handful of drivers. Since then, these companies have grown to become multibillion-dollar companies. The passage of Proposition 22 is seen by California state and local officials as a bitter loss, as they’ve long called out ride-hailing companies for being able to avoid state labour laws.
There’s a perception that the state has been too lenient for too long when it comes to regulating companies like Uber and Lyft. Now, the government has learned how powerful and influential the companies it tried to regulate have become. Uber and Lyft were able to reach their customers and drivers directly through their apps, sending them messages about the potential loss of service as a result of the proposed rules. The direct reach seems to have worked, although drivers reported feeling pressurized by the companies and others have raised questions about the ethics of using customer data and apps for delivering their service for political purposes.
The governor of California, Gavin Newsom, stayed neutral on Proposition 22, but had been advocating a deal that would protect “flexibility and innovation” in the gig economy, while giving drivers and other freelancers a “voice at work”. Uber, Lyft and other gig-economy businesses are expected to pursue federal legislation that would protect them from similar employment laws in other states.
If voters had rejected Proposition 22, gig-economy firms may have been forced to rethink their business models. Uber and Lyft had even threatened to stop running in California. Now that the ballot measure has passed, they may try to use the campaign as a model for similar battles in other states and countries. It remains to be seen how the US administration approaches reining in big tech players and gig-economy companies in light of these new developments. It will also be interesting to see they’re allowed to use similar heavy spending and direct approaches in other regions, like Europe, where labour laws are more stringent.
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