#AB5

Uber and Lyft stocks saw a bump this week after California passed a ballot measure that will exempt them (and similar businesses) from a state law requiring contracted drivers to be reclassified as employees.

App-based work platforms bent over backward and expended millions to ensure Proposition 22 passed in November, with many suggesting it was the only way to continue operations in the state. It seems those efforts weren’t for nothing. With over 80 percent of votes counted this morning, the California Secretary of State’s Office announced that 58 percent of voters supported the measure with 42 percent against. Ride-hailing platforms will be legally exempt from California’s Assembly Bill 5 and drivers will remain contracted employees.

A small group of drivers are suing Uber over repetitive in-app messages from the company about Proposition 22, a ballot initiative it would very much like them to support. Considering the deluge of political messages you’re undoubtedly getting on your own cellular device, you’re probably sympathetic to their plight. There are few things more annoying than being constantly reminded about an election nobody seems capable of shutting up about — especially when they can’t seem to get your name right.

But Uber likely crossed a line with its employees. While political action campaigns can inundate you with the most obnoxious and misleading election information, your employer isn’t supposed to. These drivers are claiming Uber violated their employment rights by trying to get them to support a ballot measure it has a vested interest in every time they checked their mobile device to hunt for a fare.

A California appeals court unanimously ruled against ride-hailing giants Uber and Lyft on Thursday, mandating that they would indeed need to reclassify drivers operating within the state as employees.

The duo have been pushing against Assembly Bill 5, which seeks to reclassify contracted, gig-economy workers as fully fledged employees entitled to all the associated benefits, all year. California even sued Uber and Lyft in May for refusing to comply with with the order but they’ve claimed AB5 will severely hinder (if not eliminate) their ability to operate within the state and have backed a measure called Proposition 22 that would grant them special exceptions.

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.

The battle between the purveyors of ride-hailing apps and the State of California has been an interesting one. The West Coast’s gig economy looked ready to be nuked from orbit following the passing of Assembly Bill 5 (AB5), leaving a glassy crater of jobless part-timers and the corporations that were dependent upon them — even though the stated goal of the rule was to protect gig workers from being taken advantage of.

Uber and Lyft looked to be the most impacted by the new law, as their entire business structure revolves around managing fares for drivers whose status as “independent contractors” was up for debate.

Claiming that hiring drivers as full-fledged employees would make the existing business model untenable, Uber and Lyft suggested they were looking into alternative solutions while fighting legal battles that would effectively make them exempt from the new law. San Francisco Superior Court Judge Ethan P. Schulman threw cold water on that concept when he ruled against the duo, saying drivers were essential to ride-hailing operations and needed to be treated as regular employees receiving the full benefits they’re entitled to.

The corporations’ last hope was double down on threat to leave the state and hope a California appeals court would grant them an extension to stage another legal fight, or just comply with AB5… which is exactly what happened on Thursday afternoon.