California Voters Shape Future of Platform Economy

The controversial ballot initiative regarding app-based drivers’ classification as either independent contractors or employees will appear on the California ballot upon the November 3 election. 

Proposition 22 was created in response to California Assembly Bill 5 (AB 5), which took effect at the beginning of January. The new law was designed to provide greater labor protections and benefits for workers by establishing a three-factor “Borello test” to determine if a worker’s status should be employee or independent contractor. Initially, the law inadvertently affected a wide range of occupations—from freelance journalists, musicians, to interpreters. 

Assembly Bill 5 received a lot of resistance from affected gig workers, many didn’t have the option or desire, became employees. They argued that it severely restricted their occupation and deterred companies from using California freelancers. As a result of the pushback, a follow-up measure was recently signed into effect to exempt professions on which it had unintended consequences. 

Rideshare companies Uber and Lyft do not have an exemption from the new law. However, they refuse to reclassify their drivers. The companies argue that they are merely tech platforms connecting drivers to riders, and not actually in the transportation industry. 

Therefore the drivers are outside the companies’ usual course of business (part of AB 5’s classification requirements, among other criteria). Lawsuits followed, and a San Francisco state court judge ruled against the companies. However, according to the Wall Street Journal, they don’t have to make changes until after the November election.

According to Ballotpedia, funding for the Yes on Proposition 22 campaign broke California records for the most an initiative campaign has ever received—$184.3 million as of September 23. Uber contributed $50 million, Lyft added $48 million, DoorDash provided $47 million, InstaCart supplied $28 million, and Postmates gave $11 million. The opposing campaign has received $10.7 million.

The strategy follows the rebuff of a similar bill affecting the “platform economy,” Proposition F (2015), known as the “Airbnb Initiative.” The main argument in favor of the proposed rules was the belief that short-term rentals hurt San Francisco’s already limited housing supply. Airbnb fiercely fought the proposed restrictions that limited the number of nights a host could rent a room and poured $9 million to a campaign to kill it. Finally, Proposition F was rejected by 55.59% of the voters.

A yes vote on Proposition 22 supports the ballot initiative to define app-based rideshare and delivery companies’ drivers as independent contractors. It would also add minimum-wage standards, limited health benefits for drivers, and introduce safety standards. A no vote opposes the ballot initiative and means that app-based rideshare and delivery companies would have to hire drivers as employees if that’s how the courts interpret AB 5. 

California State NAACP, CalAsian Chamber of Commerce, California Chamber of Commerce, California Hispanic Chambers of Commerce, and California Small Business Association have all shown support for the proposition. 

Endorsements for the opposition include the California Labor Federation, California Teachers Association, Democratic presidential nominee Joe Biden, vice-presidential nominee Kamala Harris, and Senator Elizabeth Warren.

While Uber and Lyft are focusing their efforts on passing the proposition, they’ve discussed the option of introducing a franchise-like model if the ballot initiative were to fail. 

According to a New York Times article, they’re discussing licensing their brands to operators of vehicle fleets in the state. The article estimated that it would cost Uber $500 million a year and Lyft $200 million a year to comply with AB 5. The businesses are already unprofitable and have suffered a significant drop in customer base from the pandemic.

The response from drivers themselves regarding the proposition has been mixed. It’s difficult to gauge the accurate representation of polls, but the majority of surveys seem to show that most app-based drivers prefer to be contractors. 

“For me personally, I really liked how I was contract-based. You work whenever you want to, whenever you have time,” Francisco Santa Maria, a senior at California Polytechnic State University in San Luis Obispo, told Cities of the Future. He drove for Uber and Lyft for about eight months until quarantine caused the business to slow down dramatically. During that time, he briefly worked for Instacart. 

He supports Proposition 22 and says that the job’s flexibility made it a convenient fit with his busy school schedule. Santa Maria noted that many other app-based drivers he’s met are elderly or disabled, and likely chose the work because its flexible nature allows them to work around health conditions. 

If the proposition passes in November, Santa Maria said he’ll likely return to driving for the companies once quarantine is over. If it doesn’t pass, he’ll wait to see what the new employment situation looks like for drivers before deciding whether or not to return. 

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