UBER Uber Technologies Inc

By Preetika Rana 

Uber Technologies Inc., Lyft Inc. and DoorDash Inc. won a pivotal vote in California that exempts them from having to reclassify their drivers as employees, according to Associated Press race calls.

The companies, along with Postmates Inc. and Instacart Inc., collectively contributed around $200 million to support Proposition 22, a measure that allows them to bypass a state law intended to provide employee-like protections for their drivers. The campaign was the most expensive for any ballot measure in state history. With more than 60% of ballots counted, the vote was running 58% in favor of the measure and 42% against, prompting the Associated Press to project it would pass.

The outcome deals a blow to the state government, which has been embroiled in a high-stakes battle with the companies over the reclassification. A law passed last year sought to force ride-share and food-delivery companies to reclassify their drivers as employees, eligible for benefits such as minimum wage, paid sick leave and unemployment assistance.

The app companies' business models are predicated on "gig workers" -- independent contractors -- to keep labor costs low.

None of the companies reclassified workers after the law went into effect on Jan. 1. Instead, they combined forces to support the ballot measure. The state sued in May to enforce the statute, litigation that will be superseded by the successful election outcome.

The stakes were high for the companies: A reclassification would have weighed on their already-red bottom lines and set a precedent for other U.S. states challenging their business model.

In recent months, the ride-share and delivery companies blasted ads and push notifications to drivers, saying only a fraction of them would be hired as employees. Fewer drivers would mean longer wait times, they said in messages to customers, and prices would rise because of higher costs associated with the reclassification. Uber Chief Executive Dara Khosrowshahi estimated that prices for rides could double if the ballot measure failed.

The California law at the heart of the dispute didn't restrict flexible work; lawmakers say the companies were free to structure a model where benefits and flexibility went hand-in-hand.

The companies argued it was unrealistic to extend employee-like benefits to many drivers who worked for them just a few hours a week. They also said the reclassification would force drivers to work pre-scheduled shifts, robbing them of the freedom they currently enjoy. More than half a dozen drivers interviewed said they planned to vote in the companies' favor because that messaging resonated with them.

To make their ballot measure more palatable, the companies said that if it passed they would guarantee some new protections, including health insurance for drivers who work at least 15 hours a week, occupational-accident insurance coverage and 30 cents for every mile driven. Opponents of the measure said those benefits fall short of those awarded to full-time employees.

The ballot measure can be amended only with a seven-eighths majority of both houses of the state legislature, a threshold unprecedented in previous voter-passed laws in California.

Write to Preetika Rana at preetika.rana@wsj.com

(END) Dow Jones Newswires

November 04, 2020 03:06 ET (08:06 GMT)

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