By on October 5, 2020

California’s Proposition 22 is a torpedo launched by the SS Gig Economy and will undoubtedly sink Assembly Bill 5 (AB5) if the measure passes this November. The proposal seeks to flip new laws (instituted in January) that prohibit companies from erroneously categorizing employees as independent contractors, forcing them to adhere to minimum wage laws  while likewise offering paid overtime, unemployment insurance, worker’s comp, and other obligatory benefits under the state’s regulatory guidelines. Critics have faulted numerous employers (sometimes whole industries) for abusing staff by falsely labeling them as contractors in a bid to save money. Ride-hailing platforms, like Lyft and Uber, are said to be among the worst offenders and have certainly offered the greatest push back against AB5.

Proponents of Prop 22 frequently cite the enhanced freedom that comes with the gig lifestyle. Contractors are not forced to work more hours than they want to and are likewise not beholden to their employers (or vice versa). While everyone from publishers to delivery agencies are eager to push that narrative as a positive, nobody is spending as much as Uber and Lyft to undermine the public’s opinion of the proposal. Combined, they’re dropping over $100 million to see that Prop 22 passes. Because the alternative will be far more costly for the on-demand ride-sharing businesses.

Unlike most articles on the subject, we’re not here to take a side. Assembly Bill 5 closed tons of loopholes allowing companies to act in a predatory manner in regard to how they treated staffers that really should have been deemed full-time employees. But it also nukes burgeoning industries that seem entirely dependent upon operating in this way. At a minimum, independent contractors are supposed to be able to negotiate their own rates and have direct access to customers under AB5. But neither Lyft or Uber can stomach these regulations, and have not been adhering to them.

They might not even be able to survive them from a financial perspective  leading to them rallying with like-minded businesses to advance Proposition 22. If it passes, then rideshare and delivery drivers will be eligible for classification as independent contractors. While this offers a higher level of freedom for both “employee” and employer, it’s likely to deny those working 40-plus hours a week payment and benefits they would have otherwise been eligible for. Assuming the companies survive, that is.

According to Reuters, Uber and Lyft would be subjected to at least $392 million in annual payroll taxes and workers’ compensation costs if they adhered to AB5 and “drastically” reduced their existing staff. With the above fee in mind, it’s no wonder Mercury News reported the duo are spending an estimated $181 million to run ads praising Prop 22 and advance studies alleging “80 percent of drivers work only a few hours a week” and overwhelmingly support maintaining their contractor status.

By contrast, UC Santa Cruz and UCLA surveyed drivers only to learn that the majority work over 35 hours a week. A little over half also said they’d prefer to be paid hourly with the associated benefits of a full-time employee. This tracks fairly close with our own, less scientific, study of just asking every driver we’ve ever gotten into a car with. There’s no real consensus among Uber/Lyft drivers, with most working pretty close to full time.

Unfortunately, their desire to receive fairer treatment doesn’t mesh with the bottom line of either corporation. Let’s not forget that, despite their multi-billion-dollar stock valuations, neither Lyft nor Uber are profitable companies.

From Reuters:

Using a recently published Cornell University driver pay study in Seattle as a basis, Reuters calculated that each full-time driver would cost the company, on average, an additional $7,700. That includes roughly $4,560 in annual employer-based California and federal payroll taxes and some $3,140 in annual workers’ compensation insurance, which is mandated in California.

The companies say they would need to significantly hike prices to offset at least some of those additional costs, which in turn would likely cause a decrease in consumer demand, but cushion the blow of the added costs to the bottom line.

Uber and Lyft have also said they could abandon the California market  an economy that would rank fifth in the world if the state were a sovereign nation. Other U.S. states have said they plan to follow California’s lead and pass similar laws.

Looking at things from a national level, the Trump administration has said very little about how to handle the gig economy. Companies relying on it have undoubtedly helped encourage the U.S. impressively low unemployment rates ahead of the pandemic but the quality of those jobs is sometimes questioned. Conservatives also seem broadly (though hardly universally) concerned that aggressive regulations regarding contractors may hurt states by frightening away employers and create massive holes in the job market. Meanwhile, U.S. Democratic presidential candidate Joe Biden and his running mate, Senator Kamala Harris, have been quite supportive of Assembly Bill 5 while directly opposing Prop 22.

[Image: Jonathan Weiss/Shutterstock]

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18 Comments on “Uber, Lyft Spending Big to Fight Californian Gig Economy Laws...”

  • avatar

    If Prop 22 passes, it will set back labor 100 years. No benefits of health/work comp/overtime and no real collective bargaining over wages. For the supposed benefit of “setting one’s own hours”, the drivers lose pay that would enable them to work fewer hours. For VERY few workers is the “Gig” economy a long term alternative to employment. For most it is an avenue to low paid, dead end jobs. For the state, just who provides for injured and ill workers when corporations don’t? The state does, at your expense and my expense. Either EVERY employer provides benefits, or none should have to. If you convert all health insurance and worker’s compensation to government run that’s a different solution. In the meantime, make Lyft and Uber pay up!

  • avatar

    With the help of the dying taxi industry (also known as The Absolute Worst Service Industry In The Entire Solar System) California has determined that Uber and Lyft drivers aren’t smart enough to know what’s good for them. Some of those poor dumb mooks actually think that they’re improving their own miserable lot in life by possessing the freedom to shuttle people to the airport when they need to earn some extra bucks. Just wrap your head around the stupidity of clowns like that!

    Fortunately, the wise California Legislature knows better than to allow its subjects the right to think and act for themselves. It has outlawed this kind of exploitation of the stupidest among us. Thanks to California’s enlightened patronization of its neediest demographic, that demographic now gets to choose between food or rent this month. You want a Worker’s Paradise my friend? Why, we’re already here!

    The irony is, now that the Big Mean Ridesharing has sponsored a proposition to override the law and permit these poor saps to make their own economic decisions as they see fit, we might possibly return to the same dark ages as before, when people were citizens with personal agency rather than serfs of an all-knowing, all-imposing Ruling Class. And you know what? A lot of these victimized rideshare drivers will probably vote in favor of it!

    Obviously, this must not be allowed!

    • 0 avatar

      If Prop 22 is such a wonderful deal for drivers, why is it that it is the companies that are pushing it, while the drivers mostly supported AB5?

      Reality is that Uber and Lyft both lose tons of money, and have no clear path to profitability. In 2019 alone, Uber lost $8.5 billion, Lyft lost $2.6 billion. They cannot hope to achieve profitability without squeezing their drivers. Hard.

      Gig economy companies like Uber and Lyft are not philanthropies. They seek to characterize the people who work for them as independent contractors rather than employees for one reason – so they can pay them la LOT less.

      Prop 22 is not about benefiting workers by giving them more flexibility. It’s about saving Uber and Lyft tons of money. Which is why they’re spending so lavishly to promote it.

      • 0 avatar

        If driving a rideshare gig is a bad deal, then don’t do it.

        • 0 avatar

          So said the South to the North on the subject of slavery.

          • 0 avatar

            Of course. Using Uber and whipping slaves on a plantation are pretty much the same thing.

            Did you even read that before you posted it?

            Dear God.

          • 0 avatar
            Arthur Dailey

            History has demonstrated repeatedly that without laws setting employment and safety standards, that employers/corporations exploit workers.

            Uber has demonstrated on a number of occasions that it has operated in non-compliance with applicable laws. For example in Ontario alone its mandatory arbitration rule and refusal to disclose insurance information. Foodora left Ontario when it was found to be operating in non-compliance with Labour Relations.

            These corporations are merely attempting to maximize their income/revenue. Possibly in order to inflate stock prices. That is not illegal in and of itself. But since it is how business operates. Just research the number of corporations that have been found to employ ‘illegal’ immigrants, sponsor temporary foreign workers or employ workers in relationships that are not compliant with applicable laws. Therefore the government must set minimum standards and protections. The only other option being unionization.

            Unfortunately most consumers will purchase the lower priced option, even if it might be operating in non-compliance with the law, employing illegal immigrants or eliminating local businesses/jobs.

    • 0 avatar

      Allow me to translate Cicero’s little rant:

      When legislatures pass laws I like, they’re reflecting the will of the people. When they don’t, they’re monstrous, anti-freedom, dictatorial thugs.

      Let me know what I missed here.

      Oh, and by the way: if these companies are so broke, who is picking up the *****$100 million****** tab for all that attack advertising? Maybe they should spend that on some benefit programs for their drivers so they can actually do gig work without walking the “one little thing goes wrong and I’m out of work permanently” tightrope. I think that’s all these folks want.

  • avatar

    “Crouch down and lick the hands which feed you. May your chains set lightly upon you, and may posterity forget that ye were our countrymen.”

    — Samuel Adams

  • avatar
    David Cardillo

    Can’t help but notice a trend by this publication, stating that it isn’t “taking a side” in an argument,presentation, or whatever is the post.
    When I was a burgeoning kidney in journalism, we were taught that everybody has a POV, and to state such at the outset was the “more objective” position to take. Everyone has inherent bias, and as such, so are the products from which that end results. As someone much older and wiser has said in years bygone, “Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.” ~ Marcus Aurelius I suggest humans conflate “truth” and “facts” on a regular basis.

  • avatar

    I am for prop 22. If it does not pass then I will stop using Uber and Lyft because it will be too expensive. The whole idea of Uber and Lyft were affordable prices along with convenience. Issue is the same why jobs are leaving USA and moving to Asia and South America.

    • 0 avatar

      California is an expensive place to live and to drive. I agree that taxis are a ratchet and are expensive, but you should expect that riding in a taxi is going no to be a lot Moreno expensive than driving you’re own car. Their vehicle, their insurance, and you’re paying someone else to do the driving. Why should it be cheap? I have a friend who drove a taxi for twenty years and what I learned is that the only way to drive is to do it 12 hours a day, 7 days a week with just 2-3 days off a week. Ask yourself what the CEO’s of Uber and Lyft paid themselves? Fantastic amounts of money, for companies that lose money. Does that make any sense? Uber and Lyft are just scams.

      • 0 avatar

        Why Government forces people to be full time employees if they do not want to? And at the same time Government is absolutely helpless when it comes to protecting us against criminals, looters and rioters.

        • 0 avatar

          AB5 classifies certain people as “employees”, not “full-time employees”.

          The drivers aren’t given the choice to be hired as employees. The companies only bring them on as independent contractors who need the work but find it difficult to make any money, because they need to undercut taxi companies in order to get business, and taxi drivers are notoriously ill-paid.

  • avatar

    “forcing them to adhere to minimum wage laws — while likewise offering paid overtime, unemployment insurance, worker’s comp,”

    Maintaining a minimum standard of living to protect the health and well-being of employees is certainly a platform I support.

    Gig economy is far too often a loophole corporations use to dodge paying their fair share.

  • avatar

    The only way to be paid anything approaching break-even by Uber/Lyft is to drive one’s previously-deducted luxury rig on off-hours-

    Ie: real estate agents with a luxury-branded leased vehicle

    I fully support pulling the plug on Uber/Lyft drivers as ‘independent contractors’ and, additionally— something should be done about automobile companies/dealerships/Uber/Lyft corporations goosing vehicle sales with ‘special Uber/Lyft financing’ schemes.

  • avatar

    This issue is a good representation on how our tax laws are garbage. Our bought government reps create legislation that helps their benefactors (public employee unions in this case) and hurts everyone else outside of that group.

    The reason there’s a prop 22 is because of AB5 picking winners and losers in how the Republic of California identifies who’s a ‘gig worker’ and who’s not. Prop 22 is a deep pockets interest to get ‘golden child’ exemptions from AB5 like how the entertainment industry got them. Any guesses on how the entertainment industry got the exemptions?

    As usual, the debate on the core issue is being avoided. AB5 created the mess we’re now debating, but rather than throw out the morons that voted for it, we’re debating who should not be hurt by it.

    BTW, look who wrote AB5 – it’s the same person who attacked school choice in CA because her benefactors – the school teacher public employee union – didn’t want parents to pick schools out of their districts because it would hurt the rep of the teacher’s union by highlighting failing schools.

    See a pattern?

  • avatar
    Funky D

    This article:
    “Unlike most articles on the subject, we’re not here to take a side.”

    Also this article:
    “… prohibit companies from erroneously categorizing employees as independent contractors …”
    “… Ride-hailing platforms, like Lyft and Uber, are said to be among the worst offenders … ”
    “… allowing companies to act in a predatory manner in regard to how they treated staffers that really should have been deemed full-time employees.”

    This is Jim Acosta/CNN level of “journalism”. You took a side, just admit it.

    (I’m not necessarily disagreeing with the side he’s taken, but he needs to be honest about his opinion.)

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