Rick Smith started driving for Uber and Lyft about three years ago. As a business consultant who works from his home in Palm Springs, driving for the companies offered a form of socialization while earning about $25 to $30 an hour on busy weekend nights catering tourists and locals around the California desert.
“I just wanted to do something to get out and talk to people, and something with flexibility,” he said. “The thing I loved about driving for Uber and Lyft is, if I’m not in the mood, I don’t have to do it.”
Smith was among the 6.8 million California voters who voted yes on Proposition 22 — about 58% of the vote — following the most expensive proposition fight in state history.
The passage means transportation and food delivery companies like Uber, Lyft and Doordash can classify employees as contractors insteadofworkers in the state of California, exempting them from a controversial state law that pitted workers’ advocates against the multi-billion dollar gig economy business.
While the results are generating mixed feelings among drivers, who may rely on the services in different ways, it’s a clear victory for the companies who bankrolled the measure and would’ve faced significantly increased costs if they couldn’t keep drivers like Smith classified as independent contractors.
It also could be viewed as a win for the consumers who were faced with losing the services if the companies made good on threats to leave the state.
But the widespread voter support for the measure is a blow to the labor unions and progressive groups who claim these companies are taking advantage of workers and urge fairer treatment and benefits.
Passage of this historically expensive initiative, where supporters outraised opponents by more than 11 fold, also doesn’t mean the end of the worker classification debate.
Not only is a lawsuit from the California attorney general against Uber and Lyft still working its way through the courts, but Prop 22 also could set an example for other states looking into worker classification regulation.
Both Lyft and Uber have spoken in favor of a “third way” of work beyond contractors or employees that allows people to be contractors with reduced benefits.
Anthony Foxx, Lyft chief policy officer and former U.S. Secretary of Transportation under President Barack Obama, said in a statement Wednesday that Prop 22 is the nation’s first law requiring benefits for gig workers, and signaled it was the start of something more.
“Lyft stands ready to work with all interested parties, including drivers, labor unions and policymakers, to build a stronger safety net for gig workers in the U.S.,” Foxx’s statement said.
Still, those who opposed the measure vowed to keep fighting despite Tuesday’s results.
Mixed reactions from Uber, Lyft drivers
In the run-up to Election Day, Smith chimed in on platforms like NextDoor to explain why he was supportive of Prop 22. He doesn’t usually, he said, but he thought this was important.
While Smith recently qualified for Medicare, he told neighbors that passage will give drivers a subsidy for health insurance if they need it, and provide a floor for wages.
The proposition ensures drivers will have an earnings guarantee of 120% of the minimum wage, a health care contribution toward a Covered California plan beginning at 15 hours of work a week, and accident insurance.
Lyft said Wednesday its drivers can take advantage of the law’s new benefits once the election results are certified by the Secretary of State.
That includes covering 50% of the employer contribution for health care under the Affordable Care Act, about $184 a month, for drivers who work an average of at least 15 hours a week. They’ll cover 100% of the employee contribution for drivers who work an average of 25 hours or more per week.
Smith said he can understand why driving wouldn’t make for a good full-time job and why some drivers opposed the proposition. A slow night could drive down your hourly wages to well under $20, and not everyone may have other benefits.
Smith, who pulled back from driving amid the coronavirus pandemic, says he’s ready to start heading back out as tourism picks up in the fall. A busy night could mean bringing home $300 for a few hours of driving, minus gas expenses.
“I’m excited to go back driving again,” he said.
Other drivers aren’t convinced the passage will be beneficial.
Josh Dunn of Indio, an Uber driver who hasn’t driven since the beginning of the pandemic, said the passage of Prop 22 leaves questions about features that drivers utilize on the application to ensure better payouts — and if they’ll continue. For example, Dunn likes to use a function that allows drivers to set their price.
“If they keep the trip estimated earnings and the ‘set your own surge’ feature, it’s going to be groovy,” Dunn said.
As of Wednesday night, Uber’s website still listed the set-your-own surge feature as an option, and Uber spokesperson Davis White told The Desert Sun the company “had not made any changes to the driver rideshare product in California.”
But Dunn also sees a downside to Prop 22 and continuing to classify Uber and Lyft drivers as independent contractors.
“Proposition 22 was written for the rideshare companies,” Dunn said. “It was marketed to drivers, but the rideshare companies stand to benefit much more.”
Kenneth Morrison of Palm Springs, who drives for both Uber and Lyft, said he expects the pay to be lower after Prop 22.
“They keep saying we’re independent but (rideshare companies) call the shots. If we don’t agree with what they offer us, we just get kicked off the system,” Morrison said.
Morrison added he’s upset with Uber’s co-founder and board of directors member Garrett Camp, who purchased Aaron Spelling’s Beverly Hills mansion for $72 million in 2019 while saying the company wasn’t profitable — Uber reported a net loss of $8.5 billion last year, according to SEC filings.
“They waste all this money on driverless car research, fighting AB5, Proposition 22, the lawsuits they have everywhere and the overseas support which is completely ineffective and 95% of the time they don’t even solve the problems (of drivers),” Morrison said.
A complicated, controversial history
Independent contractor rights have been debated for years, with misclassification cases having a long history in California case law.
But the run-up to Prop 22 can be traced to the spring of 2018, when the California Supreme Court handed down a ruling that restricted the use of independent contractors and implemented a three-prong “ABC test” for companies to determine how to classify their workers.
That ruling was eventually codified in state law with Assembly Bill 5 in 2019. Supporters of the bill argued that it would give more than a million workers rights to minimum wage, health benefits and other worker protections.
But some industries criticized AB5 as being too broad, and legislators began hearing from special interests about exemptions.
In September of this year, Gov. Gavin Newsom signed legislation that exempted some industries and jobs from AB5, including professional-class creative jobs like writers and photographers, or licensed ones like landscape architects and home inspectors — but not rideshare drivers.
Meanwhile, in the courts, the state’s Attorney General Xavier Becerra and the city attorneys of Los Angeles, San Diego and San Francisco sued Uber and Lyft in May, arguing that the companies misclassify their workers.
That suit resulted in a summertime threat from the companies to pull out of California over a court ruling to treat workers as employees that was put on hold as it worked its way through the system.
The gig industry-backed push for Proposition 22 earned enough signatures to get on the ballot in February.
The campaign was backed with nearly $189 million in contributions, vastly outraising opponents. Uber, Lyft, Doordash, Instacart and Postmates all chipped in millions, according to Secretary of State finance records. They flooded airwaves and digital platforms with advertisements urging people to vote yes.
One ad paid for by Lyft warns of slower response times, more expensive rides or the services leaving altogether.
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Those in opposition raised about $15.8 million, including support from a cohort of labor unions. It was also opposed by Democratic politicians, including presidential and vice presidential candidates Joe Biden and Sen. Kamala Harris and social justice leaders, including Gloria Allred and Dolores Huerta.
The Black Labor Table, a coalition of Black public and private sector leaders in Los Angeles County, urged voters to vote no on Prop 22, citing exploitation of workers.
“Our community has benefited the most from good union jobs that includes state-mandated protections for employees, like overtime, minimum wage, unemployment insurance, workers’ compensation and the right to form a union,” the group said.
Continued efforts against companies
Since they are not employees, Uber and Lyft drivers cannot technically unionize, but they’ve still got the backing of Big Labor and have gathered en masse. They say their efforts will persist after the Prop 22 results.
The Mobile Workers Alliance, a pro-driver advocacy group that says it represents more than 18,000 Southern Californians, tweeted Wednesday that they’re “only more committed to ensuring every driver is treated with dignity and respect and has the right to the same benefits as every other employee.”
Art Pulaski, executive secretary-treasurer of the California Labor Federation, said Tuesday that Uber and Lyft are “misleading the public,” and cheating the state on unemployment insurance.
If Uber and Lyft had classified workers as employees, they would have collectively contributed $413 million into the state’s Unemployment Insurance Fund between 2014 and 2019, according to a May report from The Institute for Research on Labor and Employment at the University of California, Berkeley.
“The end of this campaign is only the beginning in the fight to ensure gig workers are provided fair wages, sick pay, and care when they’re hurt at work,” Pulaski’s statement said.
California is not the only state where gig economy companies have to contend with classification regulations and criticism rooted in worker compensation.
In July, Massachusetts Attorney General Maura Healey sued Uber and Lyft for violating state wage and hour laws around minimum wage, overtime and sick time.
“Uber and Lyft have built their billion-dollar businesses while denying their drivers basic employee protections and benefits for years,” Healey said. “This business model is unfair and exploitative.”
Staff writer Brian Blueskye contributed to this report. Melissa Daniels covers economic development, hospitality and local business in the Coachella Valley. She can be reached at (760)-567-8458, [email protected], or on Twitter @melissamdaniels.