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Uber, Lyft Drivers Considered Employees Under CA’s New Gig Worker Law

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The California Public Utilities Commission (CPUC) has decided drivers working for ride-hailing services such as Uber Technologies Inc. and Lyft Inc. will be considered employees as is depicted under California’s new gig worker law.

The decision comes after a state law became effective that makes it more difficult for companies to classify workers as contractors as opposed to employees.

 

Having workers designated as contractors exempt an employer from paying overtime, health care and workers’ compensation, but can also go against the essence of the “gig economy” business model of technology platforms such as Uber and Lyft that rely on more inexpensive contract workers. 

 

The CPUC, which regulates ride-hailing companies across the state, said it has to enforce state law, and in order to do that, drivers for transportation network companies would be considered employees, at least for now.

 

In the past, the ride-share companies have stated their drivers were properly classified as independent contractors, and have indicated the majority of drivers would not want to be considered employees, appreciating the flexibility of on-demand employment.

 

The shift would also prevent the ride-share companies from effectively providing reliable and affordable services, and would threaten access to the essential work that Californians have begun to rely on.

 

In November, Lyft and Uber worked in conjunction with DoorDash on a $90 million ballot initiative that would exempt them from the law but would require the companies to provide mileage-based subsidies, health care stipends and occupational accident insurance to the drivers, while allowing the drivers to maintain their flexibility as contractors.

 

Labor unions have criticized this proposal, arguing that it creates an underclass of workers who lack fundamental protections such as sick pay and unemployment insurance.

 

In May, the State of California filed its own suit against Lyft and Uber, arguing that workers for the companies were improperly classified in violation of the new law.

 

We thank PropertyCasualty360 for reprint permission.  



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Michael Hiltzik: Uber, Lyft face a gig labor law reckoning

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If there were any doubt that California Atty. Gen. Xavier Becerra and his fellow regulators were getting fed up with the continued flouting by Uber and Lyft of the state’s new gig worker law, it was dispelled by their recent legal motion to force the companies into compliance.

In their June 24 filing, Becerra and the city attorneys of Los Angeles, San Diego and San Francisco asked a state judge in San Francisco to issue a preliminary injunction ordering the companies to immediately classify their drivers as employees rather than independent contractors.

That’s what’s required by the state’s gig worker law, known as AB 5. “It’s time for Uber and Lyft to own up to their responsibilities and the people who make them successful: their workers,” Becerra said the day the motion was filed.

After eight years of looking the other way, California officials are finally enforcing the rule of law against these so-called gig companies.

Veena Dubal, UC Hastings School of Law

It should surprise no one that Uber, Lyft and other gig economy companies see it differently and are girding for a fight — including a multimillion-dollar ballot initiative campaign — in which their survival may be at stake.

Designated as independent contractors, drivers are unprotected by minimum wage and overtime rules, receive no workers’ compensation or unemployment insurance benefits, and have to pay for their own gas, insurance, vehicle maintenance and Social Security taxes. They have no right to join or organize into a union.

The dodge of designating employees as independent contractors isn’t new. It was born in the notoriously anti-labor Taft-Hartley amendments of 1947, which first carved out the exception.

But it has become common in an entrepreneurial economy in which high start-up costs prompt business owners to search out savings in a marketplace in which “employment taxes and other workplace liabilities appear to be low-hanging fruit,” as Elizabeth J. Kennedy of Loyola University in Maryland has observed.

Uber, Lyft and other gig economy companies have exploited America’s lax workplace regulations to build businesses addicted to forcing the cost of business onto the shoulders of essential workers.

Even so, it’s unclear that their exploitation of workers has yielded a sustainable business model. Uber and Lyft acknowledge in financial disclosures that they might never become profitable under current circumstances and that things would become worse if they had to classify their drivers as employees. (Uber has lost $15.7 billion and Lyft $4.2 billion in the last three calendar years.)

Becerra’s action — the latest chess move in a lawsuit he originally filed May 22 — is just one of several prongs California officials have aimed against gig employers over alleged misclassification of employees in recent weeks. San Francisco Dist. Atty. Chesa Boudin sued the delivery service DoorDash on June 16 for classifying its delivery workers as independent contractors.

One week earlier, the California Public Utilities Commission, which had carved out a special regulatory designation for “transportation network companies,” informed the companies that as of last Jan. 1 their drivers “are presumed to be employees” and advised that the law requires them to provide the drivers with workers compensation benefits starting July 1.

Becerra’s action has been lauded as an overdue initiative to protect workers’ rights.

“After eight years of looking the other way, California officials are finally enforcing the rule of law against these so-called gig companies,” Veena Dubal, a labor law expert at UC’s Hastings School of Law, told me. “Because regulators chose not to enforce existing labor laws against the companies, they were allowed to grow precarious work — not just in this state, but all over the world.”

This isn’t a one-sided battle. The companies are fighting Becerra’s lawsuit and, perhaps more consequentially, have placed a measure on the November ballot to overturn AB 5.

Their measure, which will appear as Proposition 22, would effectively designate app-based drivers such as those working for Uber and Lyft permanently as independent contractors and forbid the state or localities to enact ordinances to treat them as employees.

The companies have provided the initiative campaign with a war chest of $110 million so far — $30 million each from Uber, Lyft and DoorDash and $10 million each from Postmates and Instacart, two other delivery services. So it behooves us to take a closer look at the measure.

Proposition 22 attempts to establish a new workplace model — a hybrid of the independent contractor and employment models.

The companies say it would preserve the “flexibility” to set one’s own work days and hours they say is valued by drivers who wish to work around school, caregiving and other work, while guaranteeing minimum pay and access to health coverage.

The measure would guarantee drivers earnings of at least 120% of prevailing hourly minimum wages, a subsidy for health coverage and protection against arbitrary firing.

The companies maintain that the vast majority of their drivers favor remaining independent contractors. Yet that’s misleading because drivers fall into two discrete camps. One is composed of true part-timers who record minimal hours, often abandon the work entirely after a few months, and appreciated the vaunted flexibility. The other is full-time drivers who may be spending 40 to 50 hours a week on the road.

Some 70% to 80% of drivers may drive 20 hours a week or less, says Harry Campbell, a former driver for Uber and Lyft who now runs therideshareguy blog, an information service for drivers. Full-timers, while less numerous, account for more than 50% of the hours worked through the companies’ app.

“For a majority of the drivers this isn’t a full-time income, so it shouldn’t be shocking that they want to stay independent contractors,” Campbell says. “But the drivers working 40 to 50 hours a week are basically working like employees without any of the benefits or protections. They’re the ones spearheading the effort to hold the companies accountable to treat drivers like employees.”

And they’re the drivers who would bear the brunt of the changes wrought by Proposition 22. Campbell says, however, that when even part-timers become educated about what AB 5 would do for them and that the law wouldn’t prevent the companies from allowing them some of the flexibility they crave, “some of them change their opinion of the law.”

There can be no doubt that the principal beneficiaries of Proposition 22 would be the companies themselves. If they were forced to classify their drivers as employees, according to the state’s nonpartisan Legislative Analyst’s Office, the resulting higher costs would “decrease these companies’ long-term profitability, which could reduce these companies’ stock market values and stock prices.”

The measure would impose some new costs on the companies, but those costs would probably be “minor,” the Legislative Analyst’s Office reckons.

Indeed, the compensation and benefits the companies would pay under Proposition 22 would fall far short of the costs their drivers must shoulder. The UC Berkeley Labor Center estimated in October that 120% of the California hourly minimum wage of $13 in 2021, or $15.60, would effectively shrink to $5.64 an hour because of provisions in the initiative.

For example, drivers would be paid only for “engaged” time, from when they are en route to pick up a passenger or delivery to when they drop off the rider or package, not for waiting time between assignments. That constitutes as much a one-third of their work time, Berkeley estimated, reducing the $15.60 to only $10.45.

Some drivers would gain from a stipend of up to about $367 a month for health insurance, which could be applied to Affordable Care Act plans from Covered California or other plans. But that would be granted only to drivers averaging 25 engaged hours a week or more. Those with 15 to 25 hours would receive half as much, and those with fewer than 15 hours would receive nothing.

“The vast majority of drivers would not qualify” for the benefit, Berkeley says.

Uber and Lyft have chosen to emphasize the purported consequences of enforcing AB 5, rather than the plain facts of their labor relationships. They , paint a picture of an army of disenfranchised drivers cast aside and unable to ply their trade.

They even hint that AB 5 could put them out of business entirely. Stacey Wells, a spokeswoman for the Proposition 22 campaign, said that if the initiative fails the companies might have to pare their driver ranks, which number as many as 400,000 in California, by as much as 90% to accommodate the added costs of treating drivers as employees.

Yet by any reasonable definition, the companies’ drivers are employees. According to rules set down by the California Supreme Court in a 2018 decision and codified in AB 5, businesses must consider workers employees unless they can meet a three-part test showing that the workers are free from the control and direction of the hiring business, that they’re performing work outside the normal course of the hirer’s business, and they customarily work independently in the same trade or occupation as the work they’re doing.

minimum earnings

UC Berkeley calculates that hidden costs would reduce the minimum earnings guaranteed drivers by Uber and Lyft in Proposition 22 by nearly two-thirds.

(UC Berkeley Labor Center)

Becerra maintains that Uber and Lyft can’t meet any of those elements. The drivers are engaged in the companies’ main business of transportation; their compensation is set by the companies, which can change it unilaterally; their performance is monitored by the companies; with the exception of the choice of the hours they wish to drive, all other terms and conditions of their work are set by the companies.

Uber and Lyft have maintained from the start that they’re exempt from AB 5 because they’re not really transportation companies, merely purveyors of the software that drivers and passengers use to arrange rides.

Some courts have dismissed that argument out of hand — “Uber simply would not be a viable business entity without its drivers,” U.S. District Judge Edward M. Chen of San Francisco declared in 2015.

Over the next few months, as the state lawsuit progresses through the courts and election day draws nigh, the survival of the gig companies’ business model will be put to the test. It should not be overlooked how much that model depends on exploiting workers.

“The initiative would codify terrifyingly low labor standards into law,” Dubal says, “undoing over a century of norms around a living wage and safety net protections for workers.”

That’s true. The power of workers to ensure decent working conditions has been on the decline in America for more than half a century. Proposition 22 would hasten the slide.



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Gig economy companies ‘systematically perpetuate inequality’ in America: Aquent CEO – Yahoo Money

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Coronavirus puts gig workers in spotlight. Will that help them?

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As more than 17 million American workers are out of a job, Sharon Goen, a former hospitality worker in Las Vegas, is having the opposite experience.

“I work six gigs,” she says.

These include delivering meals for Grubhub, moving parcels for Amazon Flex and Shipt, picking up groceries for Instacart, and, before the COVID-19 pandemic arrived, pouring drinks for Tend. 

And yet despite all the options for work that populate her smartphone screen, Ms. Goen like many gig workers is still feeling squeezed financially.

“We’re not making a living wage,” she says of gig workers. “With the pandemic, the pay is just lower and lower and lower.”

Editor’s note: As a public service, all our coronavirus coverage is free. No paywall.

The coronavirus economy isn’t providing any easy answers. Yes, a gradual reopening from lockdowns has partially reversed this spring’s historic spike in joblessness. But even as the Labor Department reports that the U.S. unemployment rate fell to 11.1% in June, many places including Ms. Goen’s home state of Nevada are seeing COVID-19 caseloads rise. On Wednesday, over 50,000 new cases were reported nationwide, the highest since the pandemic began. 

Despite the widespread slogan “we are all in this together,” the coronavirus has widened many class fissures. It has also prompted some soul-searching about how our society treats the gig workers who bag our groceries and deliver our essentials, often with no sick pay, protective gear, or job security.

As one Instacart customer put it on Twitter, at the very least it may be time to tip generously, given “the risks they’re taking to bring you food.”

Even as socially distanced lifestyles prompt Americans to rely heavily on some app-based platforms, many others in the contingent workforce are now jobless. That very juxtaposition – the burdened Instacart shoppers and the sidelined Uber drivers – could create a moment ripe for reassessing the rules underlying the gig economy. 

Several trends may already be pointing in this direction. Gig workers are more organized than ever. New laws are being drafted that make it harder for companies to treat their workers as disposable. And new digital platforms are emerging that give workers a bigger share in profits and decision-making. 

“In moments of great upheaval, things that seem unimaginable suddenly become commonsense,” says Trebor Scholz, a professor of culture and media at The New School who studies the digital economy.

Forming a movement

Ms. Goen herself epitomizes one of the labor market trends – growing collective action by workers themselves. A year ago, along with 10 other women around the United States who work for Instacart, Ms. Goen founded the Gig Workers Collective to advocate for stronger worker rights and protections. Now the GWC boasts 17,000 members nationwide. 

Instacart is perhaps the most iconic gig platform of the coronavirus era. The app works by connecting customers with “shoppers,” that is, gig workers who go to supermarkets to buy groceries on their behalf in exchange for a fee and, usually, a tip. The platform experienced a massive surge amid the coronavirus outbreak, hiring some 300,000 shoppers between mid-March and mid-April. 

Sharon Goen, a former worker in the hospitality industry, makes an Instacart delivery in Las Vegas on April 16, 2020. She says that her earnings with Instacart have declined by 60% to 70% over the past three years.

For the workers, one particular sore spot is the default tip setting. Instacart sets it to just 5% for first-time customers (it subsequently defaults to your last tip; if you tipped below 5%, it resets to 5%). Ms. Goen, a former Las Vegas bartender, is well aware of the psychology of tipping. She knows that the default setting plays a huge role in how customers will behave. “For Instacart to … leave it at 5% is just crushing.”

On March 30, in response to its members’ concerns over low tips, no sick pay, and the lack of protective equipment, the GWC organized a nationwide walk-off, an action that drew national media attention. To protect workers from retaliation, the GWC doesn’t keep track of how many people participated.

Instacart said the work stoppage had “absolutely no impact” on its operations, but the company did begin offering more resources, including reusable face masks and hand sanitizer. Earlier, the company offered 14 days of sick pay for shoppers diagnosed with COVID-19.

“As part of our unwavering commitment to prioritize the health and safety of the entire Instacart community,” read a statement from the company, “we’re working closely with the CDC, public health officials and retail partners to make sure we’re taking the appropriate precautionary measures to keep our shopper community and customers safe.”

But according to a report by CNET, Instacart shoppers have faced steep bureaucratic hurdles getting their sick pay approved. As of May 20, just one worker is known to have been approved for sick pay.

“There is absolutely zero transparency,’ says Ms. Goen. “Every time we have a strike action, they would act like they are giving us something, and [then] they would take it away.”

Still, Ms. Goen remains hopeful that actions by the GWC will bear fruit.

“We just want to be heard and acknowledged and appreciated,” she says. “We are the face of Instacart.”

Past work stoppages by gig workers have also shown results. The Uber and Lyft strikes of 2019, for instance, resulted in higher wages and improved working conditions for some drivers. 

These actions are occurring in a larger context of labor flexing its strength. The past two years have seen remarkably forceful worker revolts, from teachers protesting benefit cuts to tech workers walking out over law enforcement and military contracts. Indeed, the 2018-19 government shutdown finally came to a halt thanks to the efforts of a handful of air traffic controllers.

Legislation and legal battles 

A parallel trend: Lawmakers and judges are increasingly influencing the gig landscape, in some cases affirming the idea that contractor status doesn’t offer enough protections for gig workers. 

Instacart found itself under pressure on this front, too. Early in June, as part of an agreement with the attorney general of Washington, D.C., the company agreed to offer its workers paid sick leave nationwide.

In another important case, the 9th U.S. Circuit Court of Appeals ruled that the National Labor Relations Act does not prevent a state from adopting its own collective bargaining law, one that includes provisions for independent contractors.

Last September, meanwhile, California passed Assembly Bill 5, a law that classifies app-based gig workers as employees, entitled to minimum wage guarantees and other basic protections. 

The law codifies the so-called ABC test, which sets three criteria to determine whether a worker ought to be classified as a contractor or an employee. According to this standard, a worker is a contractor if (a) “the individual is free from direction and control,” (b) “the service is performed outside the usual course of business of the employer,” and (c) the “individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.”

This law was tested in May at the California Supreme Court, with the state prevailing against Lyft and Uber. 

“A huge landmark deal,” says Brian Chen, an attorney at the National Employment Law Project. “Other states are going to look at that, and hopefully these state laws will be a model for the federal government eventually.”

In January, New York Gov. Andrew Cuomo hinted that his state would be pursuing a law similar to AB 5. Speaking in his State of the State address, Mr. Cuomo said, “A driver is not an independent contractor simply because she drives her own car on the job. A newspaper carrier is not an independent contractor because they ride their own bicycle. A domestic worker is not an independent contractor because she brings her own broom and mop to the job. It is exploitive, abusive, … and it has to stop here and now.”

Mr. Chen describes the battle over worker classification as a first step, not an end goal. “That fight really is to set a floor,” he says. “Strong employment laws are a precondition for workers building power.”

Rise of the co-op platform

In addition to what’s happening in the realms of labor activism, legislation, and the courts, some experts see another trend that could help reshape gig work: the rise of new, worker-friendly structures for digital-platform businesses.

Platform co-ops are worker-owned entities that rely on shared ownership and democratic decision-making. These include Up & Go, a cooperatively owned housecleaning platform in New York City, Stocksy United, a stock-photo platform based in Victoria, British Columbia, that’s owned by nearly 1,000 photographers, and Green Taxi Cooperative, an 800-person enterprise that has made significant inroads into Denver’s ride-hailing market.

The concept of platform cooperativism was introduced in 2014 by The New School’s Professor Scholz, who was researching the digital economy. 

“I don’t think I’ve met anyone who does not think this is a good idea,” he says. “It’s a question of do you want cosmetic change or do you want structural change?” 

Owned by the workers, who guide their businesses democratically, platform co-ops typically take a much smaller cut for overhead costs than do their Silicon Valley counterparts. For instance, the housecleaning and handyman platform Handy says that it takes about 20% from each transaction; Up & Go takes just 5%.

Professor Scholz sits on the board of a co-op called Fairbnb.coop, an Airbnb alternative that sends half the booking fees from short-term rentals to projects that promote social welfare in the host communities. 

“It’s not about destroying Uber or about destroying Airbnb,” says Professor Scholz of platform co-ops. “They can coexist with corporations.” But, he says, “it shows you that it can be different.”

Shifts in public opinion

Even before the pandemic struck, public attitudes about digital gig work – and Silicon Valley more generally – were beginning to sour. When apps like Uber gained popularity in the aftermath of the 2008 financial crash, they were seen as an opportunity for workers to make money via their smartphone apps while setting their own schedule. 

But by 2018, workers were reporting feeling squeezed. A study that year by JPMorgan Chase found that for Uber and Lyft drivers, monthly earnings fell from $1,469 in 2013 to $783 in 2017, a decline of 53%. Also that year, a study by the Federal Reserve found that 58% of full-time gig workers said they didn’t have an emergency $400 on hand, compared with 38% of those who didn’t work in the gig economy.

Ms. Goen’s experience reflects this downward pressure on pay. She says that her earnings with Instacart have declined by 60% to 70% over the past three years.

Instacart shoppers can make as little as $7 for a grocery run, but Ms. Goen doesn’t accept every run that pops up on her phone. “It’s 110 degrees in Vegas. I’m not starting my car for less than $20,” she says.

“Gig workers have been free falling,” she says. “It’s time for some laws to be put in place.”

The shift in attitudes is perhaps best illustrated by Governor Cuomo’s change of heart. Less than three years before calling the gig economy a “scam” and a “fraud,” he vigorously defended Uber against attempts by New York City Mayor Bill de Blasio to regulate it.

“Uber is one of these great inventions, startups, of this new economy,” Mr. Cuomo said in July 2015. “It’s offering a great service for people, and it’s giving people jobs. I don’t think the government should be in the business of trying to restrict job growth.”

Mr. Chen says the mood in 2020 is very different. 

“This is a moment when the companies’ ideological spin is starting to run out,” he says. “The bloom is off the rose.”

Editor’s note: As a public service, all our coronavirus coverage is free. No paywall.

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