Opinion | Other States Should Worry About What Happened in California

Uber, Lyft and other gig economy companies congratulated themselves this week for winning a costly fight to overturn legislation in California that would have caused them to treat their contract workers as employees with guaranteed wages and benefits like an unemployment lifeline.

The companies called Prop 22’s passage a win for workers, but it should be viewed as a cynical circumvention of the legislative process and a $200 million warning to those who would oppose them. Almost immediately, the gig companies promised to begin replicating the law in other states.

Though California lawmakers in 2019 passed legislation that reclassified gig workers as employees, the companies — including also Instacart, Postmates and DoorDash — ignored the law. Displeased with the statute that could upend their business model, the gig companies banded together to write a ballot proposal that hewed to their business interests and undermined due democratic process, particularly through a provision requiring amendments to pass with a supermajority of seven-eighths of the Legislature.

Legislatures and voters should beware. Prop 22 codified a system that denies workers full benefits, true minimum wage guarantees and stability — guarantees that are especially crucial during the coronavirus pandemic. In California, gig companies overwhelmed voters and drivers with relentless and often disingenuous ads, text messages, push notifications, emails and even fliers along with their food deliveries touting the benefits of the measure, while outspending their opponents more than 10 to one.

“Prop 22 is great for employers, but it’s a huge loss for workers,” said Robert Reich, a University of California, Berkeley, professor of public policy and former U.S. secretary of labor. “This will encourage other companies to reclassify their work force as independent contractors, and once they do, over a century of labor protections vanishes overnight.”

The very foundation of the gig economy is built on a contract labor pool that can never achieve the stability of employment status but whose work is essential to delivering food, ferrying passengers and fetching groceries. Under that model, the companies take a percentage of the fares but assume none of the risk of car maintenance, health insurance or other expenses like gas.

Since their earliest days, the companies have fought to ensure that they keep an arm’s length from their workers while maintaining important controls over them, like which routes they take, how often they accept fares and which cars they drive. Maintaining the workers as independent contractors is critical for the companies because the alternative could raise labor costs by at least 20 percent and cause the companies to be held legally liable for a broader range of their workers’ behavior.

Left out of the new law is any lifeline for workers if gig work declines or if the companies shut off access to their apps. That was no accident: By one estimate, Lyft and Uber saved more than $400 million from 2014 to 2019 by not paying into California’s unemployment fund. As the pandemic took hold, gig workers had to rely on one-time federal stimulus checks.

Prop 22 guarantees workers hourly wages above the prevailing minimum, but only after they’ve accepted a fare through the time they’ve completed a trip. Waiting time adds up and very likely means that most workers would take home well under the minimum wage.

Proponents of the ballot initiative argued that an employment model, such as the state law it supplanted, would threaten workers’ flexibility, but that’s a smoke screen. Mr. Reich and others note that gig companies could devise a system that allows for both direct employment and flexible hours.

Uber, Lyft and DoorDash all vowed in statements after their victory on Tuesday to work with local governments to secure benefits similar to Prop 22’s in other states and at the federal level, but legislators outside of California should be wary. After years of fighting to preserve a contractor system with virtually no benefit guarantees, gig companies saw the light on a “third way” of employment only after California law turned unfavorable.

Some worker benefits are better than none, but lawmakers in New York, New Jersey and elsewhere have an opportunity to draft sensible legislation that extends meaningful protections to gig workers while providing flexibility and a path to the stability that employment guarantees.

Workers deserve a better support system than Prop 22 offers, and voters should be able to trust that the legislative process won’t be skirted by deep-pocketed corporations.

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