California Voters Exempt Uber, Lyft, DoorDash From Reclassifying Drivers -- 2nd Update
04 November 2020 - 10:56AM
Dow Jones News
By Preetika Rana
Uber Technologies Inc., Lyft Inc. and DoorDash Inc. won a
pivotal vote in California that exempts them from reclassifying
their drivers as employees, according to the Associated Press.
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 allows the ride-hailing and delivery companies to
avoid complying with a law that could have reshaped their business
models and battered their business in the most populous U.S. state.
It also sets the tone for gig-worker regulation in the rest of the
country.
Still, the effort to win popular support did lead the companies
to guarantee new protections. To make their ballot measure more
palatable, the companies told voters they would provide health
insurance for drivers who work 15 hours or more a week,
occupational-accident insurance coverage and 30 cents for every
mile driven, among other protections. Opponents of the measure said
those benefits fall short of those awarded to full-time
employees.
The result deals a blow to California's lawmakers, who have been
embroiled in a high-stakes battle with the companies over the
reclassification. They passed a law last year that 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 have been built around using
independent contractors, known as gig workers, as drivers 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litigation that will be superseded by the election outcome.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 now
enjoy. More than half a dozen drivers interviewed said they planned
to vote in the companies' favor because that messaging resonated
with them.
"App-based ride-share and delivery drivers across the state will
be able to maintain their independence, plus have access to
historic new benefits," the companies' Yes on 22 campaign said,
adding that it should become a model for the rest of the country to
follow."
The opposition camp--which raised around $19 million, largely
from labor unions--was dwarfed by the companies' ad spending. The
companies' campaign spent more than $80 million through Election
Day on television ads alone.
"The obscene amount of money these multibillion-dollar
corporations spent misleading the public doesn't absolve them of
their duty to pay drivers a living wage, provide [personal
protective equipment] to protect workers as the pandemic deepens or
repay taxpayers for the nearly half a billion these companies have
cheated from our state unemployment fund," said Art Pulaski, the
executive secretary-treasurer of the California Labor Federation,
which led the No campaign.
The win in California lets the companies preserve their business
models in one of their biggest markets. The state accounted for 9%
of Uber's gross bookings before the pandemic and 16% of Lyft's
business in the second quarter. But regulatory challenges are far
from over. Massachusetts sued the ride-share companies in July over
a driver-reclassification dispute. Other states have threatened
similar action.
California Assemblywoman Lorena Gonzalez, a Democrat who drafted
the law the companies sought an exemption from, said the fight
wasn't over. "Fighting corporate greed & unlimited spending is
never easy, but we do it. Over & over & over again. And,
don't worry, I got some ideas. Big love to all the drivers. #hope,"
she tweeted.
If the vote in California didn't go its way, Uber was
considering operating in just four parts of the state--the San
Francisco Bay Area, Los Angeles, San Diego and Orange
County--according to a person familiar with its plans. The company
had discussed working with third-party fleets that would in turn
hire the drivers, so it didn't have to employ them directly.
Write to Preetika Rana at preetika.rana@wsj.com
(END) Dow Jones Newswires
November 04, 2020 04:41 ET (09:41 GMT)
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