[President-elect Joe Biden’s victory prompts spontaneous celebrations.]
OAKLAND, Calif. — Drivers and different employees for so-called gig financial system firms in California is not going to grow to be their staff.
California voters carried Uber and Lyft to victory, overwhelmingly approving Proposition 22, a poll measure that permits gig financial system firms to proceed treating drivers as unbiased contractors.
Uber, Lyft and the supply service DoorDash designed the measure to exempt the businesses from a state labor legislation that will have pressured them to make use of drivers and pay for well being care, unemployment insurance coverage and different advantages. As a concession to labor advocates, the initiative gives a wage flooring and restricted advantages to drivers.
The Associated Press projected early Wednesday that Prop. 22 had carried 58 p.c of the vote. Prop. 22 confronted the strongest opposition in San Francisco, the place Uber and Lyft have their headquarters, with greater than a 19-point deficit.
The vote resolves the fiercest regulatory battle that Uber and Lyft have confronted and opens a path for the businesses to remake labor legal guidelines all through the nation. The struggle pit labor teams and state lawmakers in opposition to ride-hailing and supply start-ups that spent $200 million in assist of the measure.
In voting to assist Uber and Lyft, Californians rejected the rules outlined in a 2018 State Supreme Court ruling and enshrined in a 2019 state legislation that mentioned employees who carried out duties inside an organization’s common enterprise — and have been managed by the corporate and didn’t function their very own companies — have to be handled as staff. Under Prop. 22, gig employees are exempted from these guidelines and can proceed to work independently.
The Yes on Prop. 22 marketing campaign, backed by Uber, Lyft and DoorDash, celebrated the victory. “California has spoken,” Geoff Vetter, a spokesman for the marketing campaign, mentioned in a information launch. “Prop. 22 represents the future of work in an increasingly technologically-driven economy.” On Wednesday morning, executives at Lyft and DoorDash praised the result.
Uber’s inventory worth climbed greater than 14 p.c on Wednesday, and Lyft’s was up greater than 11 p.c on the shut of buying and selling.
Uber’s chief govt, Dara Khosrowshahi, thanked drivers for the win in a late-night e-mail. “The future of independent work is more secure because so many drivers like you spoke up,” he wrote. He mentioned Uber would make the brand new advantages promised by Prop. 22 obtainable “as soon as possible.”
“The last 14 months in California have been the most critical point on this issue,” mentioned Bradley Tusk, a enterprise capitalist who suggested Uber on political points throughout its early years. Emboldened by the election, Uber and different gig financial system gamers are prone to pursue federal laws to enshrine gig work in the nation’s labor legal guidelines.
The passage of Prop. 22 is a bitter loss for state and native officers who’ve lengthy seen the ride-hailing firms as obstinate upstarts that shrugged off any effort to make them observe the principles.
Many native officers believed California was too mild for too lengthy when it got here to regulating Uber and Lyft and naïve about how highly effective and influential the businesses would rapidly grow to be.
“For all too long, Uber and Lyft banked on the timidity of public officials throughout the country,” mentioned Dennis Herrera, town lawyer of San Francisco. “They said: ‘We’re not going to ask permission. We’ll sort of ask for forgiveness after the fact, once the horse has left the barn.’” Mr. Herrera has sued Uber and Lyft in an try and pressure them to make use of their drivers, and the litigation continues.
Uber and Lyft began in the early 2010s with only a handful of drivers, resembling automotive pool providers greater than skilled fleets. While Uber initially tried to imitate black automotive providers, it rapidly joined Lyft in selling the concept drivers have been drawn to the apps by the novelty of gig work slightly than the promise of conventional employment.
Transit officers and taxi firms warned that the drivers lacked skilled certification and weren’t subjected to background checks. Uber and Lyft argued that they have been primarily expertise firms, not transportation firms, and shouldn’t be pressured into the burdensome necessities of licensing, security checks and employment. The California Public Utilities Commission stepped in, setting baseline security necessities however permitting Uber and Lyft to keep away from hiring drivers.
Still, the employment problem endured. By 2015, the state labor commissioner ruled that drivers were “integral” to Uber’s business model, but the ruling allowed just one driver to be classified as an employee.
Still, three years later, the California Supreme Court made a sweeping and unanimous ruling in a case known as Dynamex. Under the three-prong employment test proposed by the court, Uber and Lyft drivers appeared to be employees, not contractors.
The ruling prompted concern among gig economy companies, but they did not move to reclassify their workers. Lawmakers saw an opportunity to regulate a defiant industry.
“The problem is this: Uber and Lyft have neglected not just labor laws but every law in the book,” said Lorena Gonzalez, the California Assembly member who drafted the state’s new labor law. “The only reason we were able to get A.B. 5 is because of Dynamex. The Supreme Court created such a stark, clear rule. It freaked out business as much as it encouraged labor.”
In September 2019, the State Legislature approved Ms. Gonzalez’s bill, and the law took effect in January.
Under the new law, Uber and Lyft drivers were employees. But nothing changed. The companies continued to treat them as independent contractors and vowed to take their fight to the ballot. In May, Mr. Herrera, joined by the state attorney general and the city attorneys of Los Angeles and San Diego, sued Uber and Lyft in an effort to enforce the law.
When the court ordered the companies to immediately hire their drivers, Uber and Lyft threatened to shut down in California rather than comply. They also funneled millions of dollars more into the ballot fight, making Prop. 22 the most expensive initiative in the state’s history. An appeals court granted Uber and Lyft a small reprieve, allowing them several months to comply with the order.
Although the lawsuit will continue, Prop. 22 will drastically reduce its scope. The state will continue to seek penalties for the time between January and the certification of the election results, when, it says, Uber and Lyft flouted the law.
“You look back and you say, ‘I wish it didn’t need to come to this, that people would have started adhering to the law,’” Mr. Herrera said. “I thought it was important to fight for the rights of workers and the rights of consumers.”
With the gig work model cemented in California, Uber and other gig economy companies are expected to pursue federal legislation that would protect them from similar employment laws in other states.
“Now, we’re looking ahead and across the country, ready to champion new benefits structures that are portable, proportional and flexible,” said Tony Xu, the chief executive of DoorDash, in a statement. “We look forward to partnering with workers, policymakers, community groups and more to make this a reality.”
The passage of Prop. 22 is a setback in the yearslong effort to regulate tech giants like Uber, but federal lawmakers and officials are increasingly eager to take on Big Tech. Members of Congress in both parties support cracking down on social media companies and reining in the likes of Amazon and Google. Uber and its gig economy peers could be caught in that anti-tech sentiment.
“We can’t just allow them to control what the future of work looks like,” Ms. Gonzalez said. “Somebody has to stand up for the future of workers.”