Uber, Lyft and DoorDash commit $90 million to fund a ballot fight unless lawmakers agree to a new employment model for gig workers.
Three major gig employers vowed to commit at least $90 million to pass a California ballot measure next year unless lawmakers embrace a new model of employment for hundreds of thousands of drivers and delivery workers in the state, the companies announced Thursday.
With lawmakers expected to pass a labor-backed bill to reclassify a host of workers as employees instead of freelancers, Uber, Lyft and DoorDash said they will deposit $30 million each to fund a 2020 ballot measure if lawmakers don’t create an exception for gig workers. The bill AB 5, is up for a key vote Friday in the Senate appropriations committee.
For months, the San Francisco-based companies have unsuccessfully tried to persuade lawmakers to sanction a new, hybrid employment model that would give the workers they rely on certain job benefits available to employees but still classify them as legally independent. Uber, for example, is offering a minimum wage of $21 per hour with the opportunity to earn more, access to portable benefits that could include paid time off and sick leave, as well as sectoral bargaining for rideshare drivers.
“While we continue to advocate for this progressive framework, circumstances are forcing us to plan for legislative inaction by laying the groundwork for this initiative,” said Uber spokesman Davis White.
But labor groups led by the 2 million-member California Labor Federation contend the gig economy has opened the door to mass exploitation of low-wage workers. They want an avenue to unionize. Earlier this year, the Service Employees International Union held discussions with Uber and Lyft but those talks haven’t advanced.
Labor unions are, however, unified in pushing for passage of AB 5, which would codify a sweeping 2018 California Supreme Court decision that makes it harder to classify workers as independent contractors.
“There is no deal and the companies have not met with any union in weeks,” said federation spokesman Steve Smith. “Not saying there won’t be discussions in the future but our sole focus is passing AB 5 now.”
The so-called “Dynamex” ruling established a three-part test for certifying independent contractors, with the highest hurdle being that the work performed must be outside the core of the company’s business. The decision has jolted employers statewide, essentially narrowing the definition of independent contractor and classifying many more workers as employees, with the attendant benefits and labor protections. In so doing, it has upended the rules for industries that rely heavily on independent contractors, such as the gig economy.
The fund announced Thursday is called Californians for Innovation and Opportunities. The initiative would protect gig employers’ business model by removing the uncertainty created by the court decision.
This fight is shaping up to be a particularly thorny issue for Gov. Gavin Newsom. Earlier this week, his administration disinvited a major labor leader — Robbie Hunter of the State Building and Construction Trades Council of California — from Newsom’s Future of Work Commission after an argument over whether gig workers should be granted a third type of worker classification.
That prompted Newsom’s Chief of Staff Ann O’Leary to clarify that Newsom stands with workers. “Any suggestion that this administration isn’t aggressively fighting for the right of workers to organize and earn higher wages — including rideshare drivers — is flat-wrong,” she said. The governor’s office did not respond to a request for comment Thursday.
California’s employment fight is also attracting national attention as Democratic presidential candidates weigh in on the bill.
AB 5 doesn’t just impact the sharing economy and tech. It could sweep up some 2 million workers across California, including truck drivers, general contractors, nail salons and strippers.
In steering more people to employee status, the bill would force companies to offer basic worker protections such as guaranteed minimum wage, overtime pay, contributions to Social Security and Medicare, unemployment and disability insurance as well as workers’ compensation, sick leave and family leave. Workers could also get reimbursed for mileage and maintenance of their vehicles.
But there has been a stampede by various industries seeking exemptions. So far, doctors, dentists, brokers, real estate agents, architects, engineers, accountants and hair stylists and barbers have won exemptions.
Rideshare companies contend that moving to an employee-employer model will cause a drag on flexibility, which is the primary reason people drive. According to Lyft, 89% of their drivers drive less than 20 hours a week.
The state estimates it loses about $7 billion a year in payroll tax revenue due to worker misclassification that could be supporting schools, roads and other public services. And by avoiding unemployment insurance taxes and workers’ compensation premiums, businesses shift the burden to the state when workers get laid off, get sick or get injured on the job.
For some workers, it’s about the ability to unionize.
Lyft driver Mike Robinson came from Loma Linda to Sacramento for a rally Wednesday organized by the Mobile Workers Alliance and Gig Workers Rising in support of AB 5.
“We can’t negotiate until AB 5 passes — and then we form a union,” said the 58-year-old former machinist. “This is just the first step.”
Dan Morain contributed to this report.