The battle over the future of the gig economy could end up being one of the most expensive proposition fights in California's history, and the outcome likely will have ramifications beyond the state's border.
Drivers and app-based workers are divided over a plan paid for by tech titans to challenge Assembly Bill 5, the landmark labor legislation that could require companies — including Uber and Lyft — to bring independent contractors on board as employees.
The two companies have already put up a combined total of $60 million to fund a ballot measure. App-based food delivery company DoorDash signed on with an additional $30 million, for $90 million total. The California Labor Federation, an organization that represents 1,200 unions, is preparing to go head-to-head with the companies promising a "vigorous worker-led campaign to defeat this measure," which will be put to California voters on the November 2020 ballot if supporters can collect the necessary 660,000 signatures.
The rideshare companies officially filed the “Protect App-Based Drivers and Services Act” to the California Attorney General’s Office on Oct. 29, saying it will help workers maintain independence without forgoing benefits that would be mandatory under AB 5.
Under the plan, drivers would remain classified as independent contractors despite the new law. They are offering a pay floor, new healthcare subsidies, and other perks like insurance for work-related accidents and injuries.
But a new report from University of California, Berkeley’s Labor Center concluded that loopholes in the proposal could leave some drivers with less than $6 an hour — far beneath California’s soon-to-be $13 an hour minimum wage.
While the ballot initiative claims Lyft and Uber will guarantee drivers at least 120% of the minimum wage, the analysts concluded that instead of a promised $15.60, the actual wage paid could end up being roughly $5.64 per hour.
“What’s at stake for drivers is their basic labor rights,” said UC Berkeley Labor Center Chairman Ken Jacobs, who co-authored the analysis with economist Michael Reich. “The guarantees under the initiative are effectively meaningless.”
They said the guarantee doesn’t apply to the time spent between passengers. Drivers are engaged with riders less than 70% of the time, so a third of their work hours spent looking for passengers or returning from rides, wouldn’t count. That brings the total down to $10.45. By their assessment, under-reimbursed deductions for gas, wear and tear, and mileage, takes a big toll, leaving drivers with only $5.55 per hour.
Recognizing the companies' planned health care subsidy, the academics boosted the total by $1.22, but then took out an additional $1.13 from the total for the amount of payroll taxes the independent contractors would have to cover (both their share and their employers share) and the paid rest/meal breaks, sick leave, and other benefits required by law for employees. The $5.64 left, they conclude, comes in at about a third of the required minimum pay for drivers under a new standard already enforced in New York City — an area where Uber claims they are still growing.
Lyft and Uber stand by their plan
The companies were quick to fire back. Uber economist Alison Stein recently published a detailed response on Medium classifying the Berkeley report as “a series of unreasonable assumptions and approaches to paint a predictably negative view of the recently submitted ballot initiative.”
She takes issue with the characterization that drivers aren’t paid for a third of their time, instead emphasizing that app-users might be idling, running personal errands, or working for another platform during that time.
“A cashier cannot, for instance, show up to work whenever or wherever they want. They cannot choose to ignore certain customers, or to take an unscheduled break. And they certainly cannot alternate serving customers of competing retailers,” she writes, arguing that payments made during that time would add requirements and structure that would put limits on drivers’ freedom and flexibility. She also cites the large driver demonstrations in New York against the restrictions put on them by Uber, after the new pay standard was implemented.
“Work on these platforms may not make sense for everyone, and the majority of workers will likely continue to opt for more traditional employment relationships,” she writes. “But attempting to regulate these companies by analogy to traditional employment will always fundamentally constrain their ability to deliver on this flexibility, displacing the workers whose personal circumstances make it a non-negotiable.”
She dismissed the report’s conclusions that the companies’ proposal underpays on reimbursements, arguing that they actually bumped the rate arrived at by an internal analysis that estimated the average cost of a marginal mile to be $0.258. Instead, they've chosen to offer drivers $0.30. The Federal standard mileage reimbursement rate is currently $0.58.
Drivers are divided over the proposal
Roughly 16,000 drivers have signed on support for the ballot initiative, according to a new group called "the Protect App-Based Drivers & Services Coalition," funded by Lyft, Uber, and DoorDash.
Calling the Berkeley report "an absurd analysis" the coalition also released a fact-sheet emphasizing that the act would protect app-based rideshare and deliver drivers flexibility while granting them better benefits.
"Our coalition represents on-demand drivers, network companies, small businesses, community groups, and public protection organizations," spokesperson Stacey Wells wrote in a statement. "What we’ve heard from drivers and has been borne out in polls is that drivers want independence and flexibility."
Meanwhile, more than 20,000 drivers have protested the plan and the companies backing it. In a call with press held the same day the act was released, members of a competing coalition called "We Drive Progress" said the ballot measure would set drivers back on the historic gains they made by organizing in support of AB 5.
Vowing to fight the measure and continue to build their movement, the drivers said they were facing up to 34% in pay cuts under the proposed plan.
"After working 80 hour weeks, sleeping in our cars and surviving on poverty wages, drivers organized and won support for AB 5 from both the public and lawmakers. Now, instead of obeying the law, Uber, Lyft, and Doordash want to spend $90 million to avoid accountability — all while claiming it will 'protect' drivers," said Lyft driver Edan Alva in a statement. "We call on the people of California to resist the corporate lies, to stand with drivers and against the billionaires."
The rest of the nation is watching California and the outcome of this battle could resonate across the nation. Other states, including New York, are already considering their own versions of AB 5.
"What is happening in California is being watched nationally and internationally, and will have a very large impact on the future of labor platforms," Jacobs says. He disputed the challenges to the conclusions in his report made by the companies and the coalition supporting the new plan and pointed to a new standard implemented in New York that set minimums for what drivers can be paid — that included idle time.
"New York found a way to deal with this,” Jacobs says. “That’s a good example for how [fair compensation] can be done in a way that still allows for driver flexibility,” he adds. “Uber is telling investors they can operate under that model. That’s not what they are telling drivers.”
New York City Council passed a sweeping legislative package last year that empowered regulators to rein in ride-hailing companies, and enact both caps on the numbers of drivers clogging city streets and minimum pay standards. A moratorium on new licenses issued by the city’s Taxi and Limousine Commission will continue until August 2020 and drivers already operating must be paid a minimum wage of $17.22 an hour after expenses.
Lyft and Uber have both since restricted app-use in low-demand areas of New York, prompting protests, and announced the city would see price-increases for rides. In the months that followed, Uber's rides in New York dropped by 8%, according to a Bloomberg News analysis. Lyft, which has a smaller market share, saw a 0.4% drop.
The declines were considered to have had a minimal impact by investors, which is why Jacobs says he isn't buying that rhetoric that the California law could threaten the business model. Though AB 5 institutionalizes a significant shift for new types of labor, he says the companies' response is recycled.
"Historically, every time we have looked at legislation that sets higher labor rights or where workers have organized to demand better wages and working conditions, we have heard employers say it can’t be done," Jacobs says. "But once it’s in place they quickly adjust and operate in a new environment."
This article originally appeared on USA TODAY: Uber, Lyft want California voters to undo AB 5 driver restrictions