Hooray for California
The state’s new labor law, AB5, classified Uber and Lyft drivers as employees.
The companies put proposition 22 on the ballot in response.
I am pleased to report Uber and Lyft Prevail in California Proposition exempting them from state labor law.
Key Points
- California voters weighed in on Proposition 22, a ballot measure that would exempt drivers for app-based transportation and delivery companies from being classified as employees.
- The ballot measure had essentially become one of Uber and Lyft’s last hopes in the state to continue their operations under the status quo.
- The companies faced a lawsuit from California’s attorney general, accusing them of violating the state’s new labor law, AB5.
Drivers Chime In
“In a historic election, California drivers sent a clear message that we want to be independent, and that what’s best for us is a new approach that preserves our independence while providing new benefits,” Bay Area rideshare driver Jimmy Strano said in a statement shared by Yes on 22, a committee funded by Uber, Lyft and DoorDash.
A Lyft spokesperson deferred to the statements from Yes on 22. Representatives from Uber and the California attorney general’s office did not immediately respond to requests for comment.
Prop 22 Final Results
Ride Share Guy on Prop 22
The Price of Sanity
Sanity prevailed but political action committees spent more than $785 million to support or oppose the 12 propositions on the November ballot, most of that by big tech firms.
Mish
In case anyone is still following this thread, I offer this new article:
Opinion
What Happened in California Is a Cautionary Tale for Us All
A voter-approved measure strips gig workers of basic protections enjoyed by employees in other businesses.
By Terri Gerstein
Ms. Gerstein is the director of the State and Local Enforcement Project at Harvard Law School’s Labor and Worklife Program.
Nov. 13, 2020
What happened in California? Despite the state’s liberal reputation, voters there last week approved Proposition 22, a ballot initiative exempting many gig companies from state workplace laws and stripping their workers of basic, essential protections.
Uber, Instacart, Lyft, DoorDash and other on-demand providers of ride-shares and food and grocery deliveries spent $200 million pushing the proposal, an astounding sum that workers and their allies couldn’t remotely hope to match. Not surprisingly, Californians were misled by an avalanche of claims about the proposal’s impact on workers. The measure, which takes effect next month, was approved with 58 percent of the vote.
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This opera ain’t over yet!
Fight Over Gig Workers Persists Despite Win for Uber and Lyft
A successful ballot measure in California makes drivers and other workers contractors, but the companies face continued pushback.
By Noam Scheiber and Kate Conger
Nov. 11, 2020, 1:03 p.m. ET
Last week’s election produced a crisp result in at least one high-stakes contest: California voters approved a ballot measure that exempts companies like Uber and Lyft from having to treat workers as employees.
The measure freed the companies from a 2019 state law that entitled workers to protections like overtime pay, sick leave and unemployment benefits and could have upended the gig-economy business model. As a result, Uber, Lyft and other similar businesses appeared to be on the ascent. The two companies’ stock market value increased by roughly $20 billion in the week after the election, and executives indicated that they would seek to replicate their political gains elsewhere.
“Going forward, you’ll see us more loudly advocate for new laws like Prop. 22,” Uber’s chief executive, Dara Khosrowshahi, said on a call with financial analysts last week, referring to the successful ballot measure, which also granted workers health care subsidies and a minimum pay rate.
But the question of gig workers’ labor status remains largely unresolved nationally — with a series of pitched battles likely to ensue between gig companies and labor in Washington and in state capitals, and even among unions that disagree over the importance of employee status.
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The biggest problem is now all tech companies will be emboldened to write their own laws (in California) and lie to the public until it passes. Their win has set an awful precedent.
I agree with you. While I think that the California law was a bad law, this is the wrong way to change it.
I wonder if they should teach voters to pick ballot initiatives YES vs NO with coin flip when they are not interested in the a specific issue. As it is now in California, leaving it blank is a NO. You can’t just not vote.
My main gripe with 22 is it only focused on uber and lyft. Everyone should have a choice to be an employee
And if you want to be an IC, you need to accept that you will not get any of the benefits of being an employee. Including extra $600/weekly payments when a pandemic rolls around. As an IC, you are effectively your own employer and are responsible for your own employees, which in this case, is you alone.
CA is a relatively centrist state tbh. For all the handwringing about Jerry Brown for example, he governed quite conservatively, especially in comparison to the spendthrift Schwarzeneggar (R) and Newsom.
The issue is that the republican brand here is beyond toxic, for that you can thank Pete Wilson and Prop 187. It turns out that targeting and alienating latinos, the fastest growing demographic, was not a good long term electoral strategy. Surprisingly, AZ followed a similar path with the “papers please” law in 2010. Now AZ is lost to the republicans too.
More surprisingly, the proposition for affirmative action in workplaces and universities was rejected by 56-44. While this may seem surprising, California has always had a merit-based culture in the workplace and in higher education. CSU was created as a system for those who could not get into the UC system on merit.
Boy, the socialists are out tonight. Yeah…..protect those Uber drivers right out of a job.
How ironic & disingenuous.
Increasing the scope of the precariate.
In the guise of protecting their rights.
We should be thankful to have such a wise governing class.
So who is responsible to pay unemployment and disability insurance and if it is not paid, does the applicant get sent away?
It’s like being a doorman….a low paying job that can pay very well, depending on having regulars who treat you well.
Did not get regulars when I drove for em. One cannot select a particular driver unless the programming has been updated.
No…..Uber costs more when demand is high, and drivers make more then. Good uber drivers also manage to schmooze for tips.
When Uber and Lyft went public the pay went sub minimum wage. Tips mebbe 1 in 5 rides….buck or two. And I’m very personable.
I suppose the $15 an hour doesn’t apply to them, does it?
I drove UBER and Lyft myself between projects, the big $5 per hour after expenses and taxes obviously did not cut it here in Los Angeles and I bailed after a couple of weeks.
In a proper free market economy, this is the ultimate power of the worker; the power to say “take this job and shove it” if the pay and/or the conditions are not right.
However in the oligarchical economy that the world is gravitating to, workers choices are limited and companies abilities to adequately compensate/reward good employees are strangled.
The solution is less protectionism, less intervention, less bailouts, and less government; not more.
I haven’t driven for them, but I’ve talked to people around here who have, and they say they are making $15/hour, but I’m not sure they are factoring in their fuel costs and wear and tear on their car.
Who is an employee and who is an IC has long been settled law. The IRS issued detailed regulations long ago but I don’t believe that they can enforce them unless it audits the company.
See (for example):
Uber/Lyft have claimed that their drivers are NOT integral to the business, when in fact, they are and therefore should be classified as employees. Without drivers the companies have nothing to offer other than some possible scheduling/routing software, which could be done by much smaller companies at much lower overhead costs.
Hopefully the Prop 22 results will be challenged in court and the vote canceled because people in a state can’t simply decide that they don’t want to follow existing laws and regulations at the Federal level.
If this were allowed, then why not put a proposition to vote allowing legal slavery? I’d bet it would pass. If you can afford to capture and import someone as a slave, then why should you be prohibited from doing so?
Nobody forces anybody to drive for Uber……people line up for the job…and I’ve known people who did very well at it. Often people who have a “conventional” job and drive for Uber use their driving job to elevate their families to a middle-class standard…something they can’t do with a second minimum wage job.
Yeah, I know all about what the IRS thinks….they love for everybody to be an employee, so the tax money comes off the top, and employers are the unpaid bookkeepers for the government.
You ever employed anybody…… paid half their social security and kept up with their withholding?
Are you aware of how and when that all started? It was the brainchild of a young economist named Milton Friedman (Eddie pauses to spit)……during the Second World War….and it was sold to the American public as necessary for the war effort…..and that it would be rescinded……still waiting on that.
“Nobody forces anybody to drive for Uber”
What does that have to do with the price of eggs in China or anywhere else?
This isn’t about what people prefer, choose to do or need to do. It’s a matter of existing law and a state or its people cannot choose to override Federal law simply because they like some service. Did my slave analogy not register?
These laws exist for a reason, because companies like Uber/Lyft have abused people, forcing them into IC contracts because that is a better arrangement for companies financially, tax wise and ability to fire the person whenever they wanted.
Correct. If it’s anything like over here the lower paid workers that “choose” the contractor route believe they’re better off, but they don’t take into account the loss of holidays, and other employment rights. If they chose to go on the payroll the company wouldn’t employ them and would prefer a contractor, which tells you who the real beneficiary is.
It’s completely relevant. See my reply to@ShowMeTheData
The legacy driver-for-hire business was a MONOPOLY…..too expensive to use for ordinary people….and full of all kinds of graft and corruption, and putting money right into the pockets of rich connected fat cats….like Michael Cohen, who owned several taxi franchises before he got busted.
Uber is disruptive technology that connects WILLING temporary drivers with consumers……by the millions…..it is a win/win.
Btw I’m fairly sure drivers meet all the IRS conditions for independent contractors…..they provide the equipment and the fuel.. They set their schedule, work their own hours and take off whenever they want. I’’m an employer….I’ve dealt with both employees and independent contractors.
What does “disruptive technology” have to do with anything? Who cares if something is disruptive or not? Cars were disruptive to buggy whip manufacturers. So?
It’s beginning to sound like you just enjoy posting for the sake of doing so. Try reading the links I published to the IRS IC rules. The drivers don’t meet all the tests to be an IC.
Disruptive technology is what drives an improved standard of living for humans on this planet…..and has since the 19th century. It’s what made this exchange we’re having possible.
You can post all the links you want. I think you’re just a well-off suburbanite who (a) doesn’t need the work that Uber drivers need, and (b) who has some kind of misplaced sense of obligation to a lower class you’d never actually rub shoulders with in your own life…and you don’t understand how having an instantly available second or third job might help someone willing to work long hours to get ahead.
Still has nothing to do with laws, many of which there are a reason for.
Why should Uber/Lyft get special treatment when it comes to employee costs? Because they are driving a disruptive technology? Why not make ALL employees in ALL companies IC’s and lower EVERY employers cost? Why not ban unions entirely?
Are you an oligarch in waiting Eddie?
I agree, Eddie. There is no question in my mind that Uber drivers meet all the definitions of an independent contractor. It has long been established that paper carriers are independent contractors, and Uber drivers have much more control over their work situation than a paper carrier. Paper carriers have to show up every day, and do a specific quantity of work every day. Uber drivers don’t. They decide when they are on the job, and when they are not.
As usual Carl, you are in over your head. You don’t understand the subject matter but insist on making comments based on how YOU think the world should operate.
“There is no question in my mind that Uber drivers meet all the definitions of an independent contractor.” Well whoop de doo! That and a $2-3 will get you a cup of coffee.
Here is an excerpt from a good overview story that everyone in this thread should read:
The ‘ABC Test’
In 2018, drivers seeking employee status scored a major victory — ironically, as a result of a California Supreme Court case that had nothing to do with gig companies.
This case began in 2005, three years before smartphones even existed, and close to a decade before the dawn of the gig economy. A truck driver sued a delivery company called Dynamex for classifying him as a contractor and not paying employee benefits.
In April 2018 — 13 years after the case started — the court ruled in favor of the driver. The ruling established an “ABC test” for employment, in which workers can only be considered contractors if they:
a. are free of control and direction from the company;
b. perform work outside the normal course of the company’s business;
c. regularly engage in some kind of independently established trade or occupation
Nevertheless, in the absence of any enforcement, Uber and Lyft continued to classify their drivers as contractors.
The following year, the state Legislature took up the issue.
AB 5, introduced by Assemblywoman Lorena Gonzalez, D-San Diego, went into effect Jan. 1, 2020, codifying the Dynamex decision into law.
In advocating for the bill, Gonzalez specifically called out gig companies like Uber and Lyft.
The ABC test is an actual court decision and is based on decades old IRS rules. Uber/Lyft have been and currently are being sued for misclassifying employees as IC’s by numerous states, including CA, NJ, MA and more. The fact that they have been able to stave off having to reclassify workers for over 7 years now is testament to our screwed up legal system. They are going to ultimately lose and pay multi-billion fines and back pay/benefits to the misclassified employees. The only real question is will full autonomous cars come about before they do because afterwards, ZERO of the current drivers will have work.
“Hopefully the Prop 22 results will be challenged in court and the vote canceled…”
“Hopefully the will of the people as legally expressed through the legislative process will be nullified.”
Two comparable statements.
Wake up Dan. As I stated above, “the people” can’t just decided they don’t like a higher level law/regulation and choose to ignore it, whether by vote or otherwise.
Agai, if this were possible, I’m confident that a majority of people would vote to reinstate slavery (not just of black people) if they could in states like AL or MS, for example. There are plenty of Asians living on $$2 a day who would be happy to become a slave of an America for a roof over their head and 3 meals a day.
Wake up Jojo and read the IRS link you provided!
“The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”
Drivers use the platform (i.e., payer is controlling the result) WHENVER they feel like making a buck (i.e., driver controls how work will be done). There is plenty of latitude in the rule to imply flexibility for the state to decide, AS THEY SHOULD!
What part of “This applies even if you are given freedom of action.” isn’t clear to you?
Uber/Lyft control the platform. They can allow you access or not. They can demote you and supposedly pull other tricks if your ratings drop. Therefore, they have the ultimate control.
Drivers are [currently until autonomous cars become viable) integral to Uber’s/Lyft’s business. Their business, as currently structured, could not exist w/o the drivers. Therefore, the drivers are employees.
Now, why is the IRS not enforcing its own regulations and taking the state and its voters out of the equation? I do not know.
“The people can’t just decide they don’t like a higher level law and choose to ignore it”???
Ahem….marijuana.
Ahem…. And technically, the Federal government COULD come a knocking whenever they choose to, lock everyone up and close down businesses. I am reasonably certain that the conflict with federal law is the reason that the pot shops have to do business in cash. They aren’t allowed to accept credit cards.
The problem is that states always need more tax revenue and the pot explosion is overlooked because it generates increased taxes. Same reason why tobacco use is still allowed. Or alcohol. Or interstate gambling in the form of lotteries such as Mega Millions and Powerball.
If and when the courts start agreeing with you, i”ll agree that you are right. Until then it would appear that they are correctly classified as independent contractors.
Large corporations like Uber and Lyft are audited every year by the IRS.
They may be audited but for what is unknown. The IRS isn’t allowed to go on random “fishing” trips to see what they can find. They can only audit something that they believe is in violation or is incorrect. I don’t know how that applies to the IC problem which has been going on for decades in the computer industry, where I have my background.
uber drivers as contractors really get abused. its a terrible business model for the dirvers and a really good one for uber. but this is the future. medallion taxi drivers should quit now.
Yes – 100% agree. This is raw capitalism at work, taxi drivers with their medallions get screwed because of Uber and Lyft drivers, and Uber and Lyft drivers will work for pennies.
in nyc they sold way too many medallions , then bring in uber and those medallions are now worthless. for decades medallions were a way for drivers to build a retirement cushion
The old business model, drivers with medallions having a monopoly, meant poor service and high prices, but really rich drivers, or at least, rich medallion owners. It’s clear that Prop 22 is much better for consumers, but worse for medallion owners. There are more consumers that medallion owners, so it doesn’t surprise me that it passed.
This is another example of democratic myopia. Only the most desperate drivers will work for Uber and Lyft now, because it’s a money losing business if you’re a driver.
“Drivers”…..damn the autocorrect.
Yes I noticed that immediately and it made me happy. These gig economy companies that run on apps are very good for both consumers and people who really need the work. It’s a win/win for the economy.
They need to be nurtured, not regulated out of business.
Making Uber divers employees kills the business model. The drivers who asked to be employees are just dumb….and they just want to have their cake and eat it too. It doesn’t work like that. They need to understand if they want the work, they have to pay their own taxes.
I have to wonder if you’re a rideshare driver because you really drank Uber’s kool aid. Uber’s business model is and has always been fundamentally flawed because they’re using venture capital to keep the price of their service artificially low. That and continuously reducing the amount of money their drivers are allowed to keep. It’s popular with the consumer because they appreciate not having to pay what the fare would be if it came out of actual earnings. Uber has never earned a profit. It’s also popular with the very small minority of Uber’s shareholders and the founders who have become billionaires on the backs of their underpaid, mistreated drivers. Prop 22 is an insidious piece of legislation that allows Uber to continue treating their drivers like share croppers and indentured servants, and it’s a cancer that they want to spread and expand to a national and even globally level.
So exactly who is forced to drive?
No, I’m not a rideshare driver. But damn near everybody I know uses Uber and Lyft, especially the younger people in my kids generation.
They don’t care if Uber makes a profit. Given what I see about the business model, without drivers making money, Uber goes out of business. There is a very open exchange going on…..it either works and the driver makes enough to make it worthwhile, or they quit.
The fact that Uber made some billionaires is just typical of the way our investment banking system works….and the willingness of investors to wildly speculate on new technology because it keeps making people rich….and they gladly risk their money… and if Uber never makes a profit, then eventually they lose their money.
If you ARE a rideshare driver who wants the government to negotiate for you to make sure you get paid what you think you’re worth…..then you should consider that making Uber into an employer will just as surely put a ceiling on what you can make…..as it will the floor under you that you’re hoping to establish.
What the government gets out of the deal is a guarantee that you pay your taxes at the level they determine is owed, with no possibility of you altering that through your own tax reduction strategies like every legitimate independent business man does.
It will also make you and the employer subject to overtime requirements that will result in curtailing the hours you can work.
You just can’t have your cake and eat it too.
Global that is…
It’s not like Uber/Lyft will ever in a million yrs make money. That’s not the point. The point of them is what you said – drive down wages.
Meanwhile Uber/Lyft lose fantastic amount of money. The Fed is providing endless liquidity for bad ideas like Uber/Lyft…meaning Fed QE is financing this “gig economy” to drive down wages more and more.
And Fed liquidity/QE is doing the same thing to healthcare, with Fed juiced up hedge funds carving out “specialty” parts of hospitals (emergency rooms, treatments, etc) to pviatize and jack up prices 1000% or more. And making it all out of network, too.
It’s a double two-fer.
Some good news though:
Florida approved a $15 minimum wage with 60% yes.
Should have been $20 though.
Well i voted against it. My thought was it would open the door to more companies “contracting” out their work to cut down on their labor cost.
That is exactly the point. It’s not like Uber/Lyft will ever in a million yrs make money. That’s not the point. The point of them is what you said – drive down wages.
Meanwhile Uber/Lyft lose fantastic amount of money. The Fed is providing endless liquidity for bad ideas like Uber/Lyft…meaning Fed QE is financing this “gig economy” to drive down wages more and more.
And Fed liquidity/QE is doing the same thing to healthcare, with Fed juiced up hedge funds carving out “specialty” parts of hospitals (emergency rooms, treatments, etc) to pviatize and jack up prices 1000% or more. And making it all out of network, too.
It’s a double two-fer.
Some good news though:
Florida approved a $15 minimum wage with 60% yes.
Should have been $20 though.
Companies will do what they need to do to counteract AB5, in order to control their labor cost. Nothing occurs in a vacuum. Some will even leave California or expand their business in another state.
is there something wrong with cutting down labor costs?
Yes = lower standard of living.
Of course. Lower labor costs = lower standard of living.
Of course. Lower labor costs = lower standard of living.
Nothing but there is something wrong when these same companies spend quite generously to their executives, to prop 22 (reportedly some $300+Mil). BTW I am sorry for the drivers who showed up on company paid advertisements. As we speak these companies investing heavily on AI for driverless cars. They don’t care about drivers but they need them for a while.
Other statutory rules or regulations are what creates the desire to make people independent contractors in the first place. Newspapers are one group that has used them for a very long time (carriers), but whenever new rules impose additional burdens on employers, it increases outsourcing. For example, in France my understanding is that it is very difficult to fire someone, so companies are very reluctant to hire anyone in the first place, and use independent contractors for everyrhing.