If there was any doubt that California Atty. General Xavier Becerra and his colleagues were fed up with Uber and Lyft continuing to violate the state's new gig worker law. This has been negated by their recent legal motion to force companies to comply.
In their file filed on June 24, Becerra and the lawyers from Los Angeles, San Diego and San Francisco asked a state judge in San Francisco to issue an injunction asking companies to immediately employ their drivers as employees rather than as employees classified as an independent contractor.
This is required by the state law on gig workers, known as AB 5. "It is time for Uber and Lyft to face up to their responsibilities and the people who make them successful: their workers," said Becerra on the day the application was submitted .
After eight years of looking away, California officials are finally enforcing the rule of law against these so-called gig companies.
Veena Dubal, UC Hastings School of Law
It should come as no surprise to anyone that Uber, Lyft, and other gig economy companies see it differently and prepare for a fight – including a multi-million dollar campaign – where their survival is at stake.
Identified as an independent contractor, drivers are not protected by minimum wage and overtime arrangements, receive no employee compensation or unemployment benefits, and have to pay their own gasoline, insurance, vehicle maintenance, and social security taxes. You have no right to join a union or organize.
Dodging employees as independent contractors is not new. It was born in the notoriously anti-labor Taft-Hartley amendments of 1947, in which the exception was first worked out.
In an entrepreneurial economy where high start-up costs drive entrepreneurs to look for savings in a market where "employment taxes and other workplace liabilities appear as low-hanging fruits," observed Elizabeth J. Kennedy of Loyola University in Maryland .
Uber, Lyft, and other gig economy companies have used America's lax job regulations to build companies that are addicted to putting business costs on the shoulders of key workers.
However, it is unclear whether the exploitation of workers has led to a sustainable business model. Uber and Lyft acknowledge in financial statements that under the current circumstances they may never become profitable and that if they had to classify their drivers as employees, the situation would deteriorate. (Uber has lost $ 15.7 billion and Lyft $ 4.2 billion in the past three calendar years.)
Becerra's action – the latest move in a lawsuit he originally filed on May 22 – is just one of several measures California officials have taken against gig employers for allegedly misclassifying employees in recent weeks. San Francisco Dist. Atty. Chesa Boudin sued the delivery service DoorDash on June 16 for classifying its deliverers as independent contractors.
A week earlier, the California Public Utilities Commission, which had designated a special government name for "transportation network companies," informed companies that their drivers were "likely to be employees" as of January 1, and said the law required you to do so are supposed to grant drivers compensation from July 1st.
Today, my office initiated a lawsuit against @doordash for illegally misclassifying employees as independent contractors.
"I assure you, this is only the first step among many to fight for the safety of workers and the equal enforcement of the law" #PromisesKept
– Chesa Boudin @ (@chesaboudin), June 16, 2020
Becerra's approach was praised as an overdue initiative to protect workers' rights.
"After looking away for eight years, California officials are finally enforcing the rule of law against these so-called gig companies," said Veena Dubal, an employment law expert at the UC's Hastings School of Law. "Because regulators decided not to enforce existing labor laws against companies, they were allowed to build precarious work – not just in this state, but around the world."
This is not a one-sided struggle. The companies are fighting Becerra's lawsuit and, possibly more consistently, have put a measure on the November ballot to overthrow AB 5.
Your measure, which will appear as Proposition 22, would effectively identify app-based drivers like those who work permanently for Uber and Lyft as independent contractors and prohibit the state or local authorities from enacting regulations to treat them as employees.
To date, the companies have provided the initiative campaign with a war chest of $ 110 million – $ 30 million each from Uber, Lyft and DoorDash, and $ 10 million each from Postmates and Instacart, two other delivery services. We must therefore take a closer look at the measure.
Proposal 22 tries to establish a new workplace model – a mix of independent contractors and employment models.
Companies say it would retain the "flexibility" to set their own working days and hours, which they think are valued by drivers who want to work in school, nursing and other jobs, while maintaining a minimum salary and guarantee access to health insurance.
The measure would guarantee drivers an income of at least 120% of the current hourly minimum wage, a subsidy for health insurance and protection against arbitrary dismissal.
The companies claim that the vast majority of their drivers prefer to remain independent contractors. However, this is misleading as the drivers fall into two separate camps. One is made up of real part-time employees who only record minimal hours, who often give up work after a few months and appreciate the praised flexibility. The other are full-time drivers who may be traveling 40 to 50 hours a week.
About 70% to 80% of drivers may drive 20 hours a week or less, says Harry Campbell, a former Uber and Lyft driver who now runs the therideshareguy blog, a driver information service. While there are fewer full-time employees, they account for more than 50% of the hours worked through the company app.
"This is not a full-time income for the majority of drivers, so it shouldn't be shocking that they want to remain independent contractors," Campbell says. “But the drivers who work 40 to 50 hours a week basically work like employees without the benefits or protection. They are the ones leading the effort to hold companies accountable to treat drivers and employees. "
And they are the drivers who would bear the brunt of the changes brought about by Proposition 22. Campbell says, however, that even part-time workers are informed about what AB 5 would do for them, and that the law would not prevent companies. Some of them change their minds about the law by giving them some of the flexibility they are willing to do crave.
There is no doubt that the main beneficiaries of Proposition 22 are the companies themselves. If they were forced to classify their drivers as employees, the resulting higher costs would "decrease the long-term profitability of these companies, which could decrease these companies' stock market prices and stock prices," according to the state's impartial legislative analyst.
The measure would impose some new costs on businesses, but these costs would likely be "small," estimates the Legislative Analyst’s Office.
Indeed, the compensation and benefits companies would pay under Proposal 22 would fall far short of the cost of their drivers. The UC Berkeley Labor Center estimated in October that 120% of California's minimum wage of $ 13 in 2021 or $ 15.60 would effectively shrink to $ 5.64 an hour under the terms of the initiative.
For example, drivers would only be paid for the “dedicated” time, from picking up a passenger or delivering to delivering the driver or package, not the waiting time between missions. Berkeley estimates that this accounts for a third of her working time and reduces the $ 15.60 to just $ 10.45.
Some drivers would benefit from up to $ 367 per month health insurance scholarship that could be applied to Covered California's Affordable Care Act plans or other plans. However, this would only be granted to drivers who work an average of 25 hours a week or more. Those with 15 to 25 hours would receive half as much, and those with less than 15 hours would receive nothing.
"The vast majority of drivers would not qualify," said Berkeley.
Uber and Lyft have chosen to highlight the alleged consequences of enforcing AB 5 rather than the simple facts of their working relationships. They paint a picture of an army of disenfranchised drivers who were thrown aside and unable to do their jobs.
They even hint that AB 5 could get them out of business entirely. Stacey Wells, a spokeswoman for the Proposition 22 campaign, said that if the initiative fails, companies may have to cut their driver numbers, which can be up to 400,000 in California, by up to 90% to cover the additional cost of treating drivers to cover as an employee.
However, according to a reasonable definition, the drivers of the companies are employees. According to the rules set by the California Supreme Court in a decision of 2018 and coded in AB 5, companies must consider workers as workers unless they can pass a three-part test that shows that the workers are free from control and guidance of the hiring company. that they work outside of the tenant's normal course of business and usually work independently in the same trade or profession as the work they do
UC Berkeley calculates that hidden costs would reduce the minimum earnings drivers guaranteed by Uber and Lyft in Proposition 22 by almost two-thirds.
(UC Berkeley Labor Center)
Becerra claims that Uber and Lyft cannot fulfill any of these elements. The drivers work in the company's main transportation business. Your remuneration is determined by the companies, which they can change unilaterally. Their performance is monitored by the companies. Except for the choice of hours you want to drive, all other working conditions are determined by the companies.
Uber and Lyft have claimed from the start that they are exempt from AB 5 because they are not real transport companies, but merely suppliers of the software that drivers and passengers use to arrange trips.
Some courts immediately dismissed this argument: "Uber would simply not be a viable business unit without its drivers," said District Attorney Edward M. Chen of San Francisco in 2015.
The survival of the gig companies' business model will be put to the test in the next few months, when the state lawsuit goes to court and election day gets closer. It should not be overlooked how much this model depends on the exploitation of workers.
"The initiative would legally codify shockingly low labor standards," says Dubal.
That's right. The power of workers to ensure decent working conditions has been declining in America for more than half a century. Theorem 22 would accelerate the slide.