Sarah Holder is a staff writer at CityLab covering local policy, affordable housing, labor, and technology.
As California considers a gig-work bill to make ride-hailing drivers employees eligible for benefits and bargaining rights, Uber and Lyft ask for compromise.
This week, three titans of ride-hailing—Uber CEO Dara Khosrowshahi, Lyft co-founder Logan Green, and Lyft CEO and president John Zimmer—took a rare break from competing on the roads to collaborate on the page: They penned an op-ed in the San Francisco Chronicle to voice their collective opposition to a new California law that would re-classify their drivers as employees, allowing them the benefits and bargaining rights long withheld from independent contractors.
The sweeping gig-worker legislation, Assembly Bill 5, passed the state assembly last month and now awaits a vote by the state senate and the signature of Governor Gavin Newsom. Acknowledging the gravity of the threat such regulation would pose to their businesses (which are already losing billions of dollars every year), the two now-public companies are keen to use this moment to advocate for an alternative.
“Many drivers are offering ideas to improve their experience, and companies like ours have a responsibility to come to the table prepared to do our part,” they write. “We have an opportunity to work with legislators and labor groups to find a different solution that preserves drivers’ ability to work independently if they choose to do so while improving the quality and security of their work.”
Uber and Lyft have long balked at classifying drivers as employees, arguing that their companies simply connect freelancers with clients—in fact, they say they aren’t really even transportation companies. But in its April 2018 Dynamex decision, the California Supreme Court ruled that, to be a true independent contractor, workers must be “free from the control and the direction of the hirer,” performing work outside the company, and be doing independent work in that trade. It’s that decision that AB5 would codify.
If passed, ride-hail drivers would likely fail the test. To avoid this re-classification, companies are suggesting simply amending California’s existing employment law to allow them to give drivers “a system of worker-determined benefits—from paid time off to retirement planning to lifelong learning,” which could be delivered through a prorated portable benefits program. Instead of slotting drivers into the pre-existing category of employee, Uber and Lyft want to create an entirely new one, which could allow companies to give drivers benefits without turning them into full-on employees—something that’s currently impossible.
The bill’s progress reflects the growing momentum behind gig-work labor regulations. Once isolated and atomized, ride-hailing drivers are now flexing their organizational muscles. They went on strike, first in L.A., and then in cities worldwide. Driver-organizers say the op-ed suggests that Uber and Lyft are spooked by the bill’s implications—and that as new regulation comes for the industry, these companies want a hand in shaping it.
“They have been in the ears of legislators and Governor Newsom in trying to get a carve-out, an exception,” said Brian Dolber, an organizer with L.A.’s Rideshare Drivers United. “They’ll do whatever they can so that this law isn’t going to apply to them—whether it’s stopping the law in total, or creating an exemption.”
The industry’s case rests on the notion that the flexibility of ad-hoc work is a greater benefit to most drivers than a traditional employment arrangement—especially for those using Uber to supplement their incomes. To support that, the op-ed links to a National Bureau of Economic Research working paper that claims this flexibility allows drivers to earn more than they would in other non-gig jobs. (Two of the paper’s four authors are current or former Uber employees*.)
But while organizers agree that drivers want to keep the freedom to choose their own schedules, they say it’s a myth that becoming full employees would be incompatible with keeping that autonomy. “The CEOs are very strategically trying to give this impression that being an independent contractor means freedom and flexility, when in fact it means you’re given fewer and fewer rights than the rest of the workforce,” said Dolber.
Scheduling isn’t part of the Supreme Court’s test at all, and Sinakhone Keodara, a driver and a former organizer with Rideshare Drivers United, says that the issue of flexibility is “a straw man and a threat.”
According to Uber, however, while AB5 wouldn’t force employers to introduce rigidity, it could reduce drivers’ ability to switch between platforms and push companies to enforce stricter work policies. Many drivers take up driving as a welcome alternative to the grind of on-call scheduling, or the precariousness of taking spotty shifts in other low-wage workplaces.
What’s most striking about the op-ed, say labor experts, is that it illustrates the growing stakes for the ride-hailing industry and the cities where it operates. “Uber and Lyft are acknowledging that the tide has the potential to turn,” said Katie J. Wells, a postdoctoral research fellow at Georgetown’s Kalmanovitz Initiative for Labor and the Working Poor who published a report on Uber driver dissatisfaction this spring.
Indeed, Bill Sokol, a Bay Area labor lawyer, interprets the companies’ offer to create a new employment classification a sign that this tide may already have turned. “They’re saying, OK, we realize the court has really screwed us. Now, how can we make this as inexpensive as possible?” Sokol said. “[They’re saying,] we have created a business model that only works if we don’t give workers overtime pay, unemployment insurance, worker compensation, state disability insurance, and anti-discrimination law … And the legislature is saying, this is not good for the future of California. We can’t have these giant companies who rely on people not having any kind of workplace rights.”
While the joint op-ed suggested that the two companies could be willing to offer drivers some of those rights, it said that it was state lawmakers’ responsibility to first settle the contested employment status issue. But there are things that Uber and Lyft could do now—without the assistance of or permission from the California Legislature—to address driver concerns surrounding pay and wage transparency that wouldn’t require any change to the legal status of their drivers. Amazon, for example, gave its employees a $15 minimum wage last year, after pressure from Vermont Senator and presidential candidate Bernie Sanders.
Besides fending off new regulation, Uber and Lyft now also have to contend with the growing power of driver groups, whose organizing efforts have been bolstered by unions like Gig Workers Rising and SEIU. If drivers become traditional employees, they’ll be allowed to formally organize, and more of them might. To get ahead of this possibility, the CEOs suggest starting “a new driver association, in partnership with state lawmakers and labor groups.”
Uber already partially funds something like this in New York City: The Independent Drivers Guild, which represents more than 70,000 ride-hail drivers in NYC, receives “an undisclosed sum” of money from the company, according to the New York Times, in addition to driver contact info. Though the IDG was integral in pushing NYC’s first-of-its-kind driver minimum wage, and marched in solidarity with ride-hail workers during the international May strike, many drivers don’t trust its independence.
“We want a voice on the job that is democratically driven by drivers themselves,” said Dolber. Both Uber and Lyft have a driver advisory Forum and Council, respectively, which meet a few times a year. But Dolber says that neither Uber nor Lyft have reached out to Rideshare Drivers United, which organized the March L.A. strike and was central to organizing the May international day of action. “If they want to work with labor groups, we’re here waiting for them to come to the table and begin to abide by the terms we set out in our Driver’s Bill of Rights,” he said.
In the meantime, other drivers are putting a different sort of pressure on Uber and Lyft. A campaign led by Gig Workers Rising and the Mobile Workers Alliance calls on California’s five largest pension funds to avoid investing in the companies, which both went public this spring.
“We felt it was our duty to inform the public that what they’re doing is not sustainable,” said Konstantine Anthony, an Uber driver and Mobile Workers Alliance organizer who works in Los Angeles County. “And the way they run their business doesn’t just hurt the drivers. If you were to invest in their funds, it will hurt you too.”
The movement of AB5 may help make drivers’ case against investment even stronger. “Once these laws change,” said Anthony, “these companies are going to be hit hard, and have to pay out to drivers.”
The prospect of the gig-work bill passing in California is “stunning,” says Wells: “The reality is that it’s not [only] important for the Uber and Lyft folks, but—at least in our study—these workers who are operating as the working poor, they have been working such precarious vulnerable lives for so long.”
The stakes of not passing it are even higher, says Dolber.
“If companies can just reclassify workers as independent contractors, this is how all worker’s rights are going to be decimated in the next couple of decades,” he said. “This could really be a Trojan horse of undoing labor law that’s been the cornerstone of having an American middle class.”
*CORRECTION: A previous version of this article incorrectly categorized the nature of the NBER working paper cited by Uber and Lyft.