Jason Schaal was sitting at home in Minneapolis last month when he opened his phone to check his email. Among the messages was one from Uber bearing the subject line, “Make your voice heard.” It said the US Department of Labor was hammering out countrywide rules “to determine the independent status of gig workers” and asked Schaal to comment on the plan. As an Uber driver, Schaal said he found the persuasive tone of the email unsettling.
“One of the top reasons you drive with Uber is the flexibility,” read the Oct. 22 email, which was seen by CNET. It asked Schaal to share a few sentences about being an independent contractor, giving prompts like “the ability to balance other jobs” and “earn extra money as a student, caretaker or retiree.”
Schaal, who does full-time gig work for Uber, Lyft, Instacart and Shipt, clicked the link in the email, which took him to a comment page on the Department of Labor’s website. He opted not to leave feedback.
“As I read that email, one of the impressions I got is that Uber is going to put their spin on things,” Schaal said during a phone interview. “It’s almost manipulating to persuade drivers to comment with Uber’s point of view.”
The timing of Uber’s message was no coincidence. It came 12 days before the ride-hailing company’s big victory in California, where it and other gig economy companies spent $205 million to convince voters to approve its Proposition 22 ballot measure. The measure ensures that drivers in the state are classified as independent contractors, rather than employees, sidestepping the need for companies to provide benefits like health insurance. The companies hope to replicate their ballot box success across the country, and they’ve already been plotting their national push.
Spokespeople for Uber, Lyft, Instacart and DoorDash confirmed to CNET that the companies are planning to bring their Proposition 22 model nationwide, saying that’s what gig workers want.
The emails to drivers like Schaal represent just one element of Uber’s broader strategy to go countrywide. In August, the company published a white paper outlining “priorities for industry and government action” on gig worker classification state by state. That same month, Uber released findings from a nationwide survey it commissioned on what drivers and voters think about workers being classified as independent contractors. The company has also hired a record number of federal lobbyists and created an information portal for drivers titled “Together, we can reinvent independent work.”
Now, with the California vote showing it’s possible to beat laws and regulators with a lot of money and groundwork, Uber and its gig economy companions have hit the ground running in the rest of the country. Emboldened by the Proposition 22 win, Uber and Lyft said they’ve been reaching out to unions, state regulators, governors and federal officials. The companies say California could serve as a template for how gig workers should be classified nationwide.
“Going forward, you’ll see us more loudly advocate for new laws like Prop 22,” Uber CEO Dara Khosrowshahi said during an earnings call earlier this month. “It’s a priority for us to work with governments across the US and the world to make this a reality.”
On Wednesday, Uber, Lyft, Instacart, DoorDash and Postmates launched a coalition out of Washington, DC, called the App-Based Work Alliance. The aim, the coalition says, is to “preserve worker independence.” It points to Proposition 22’s passage and says it will educate state officials on independent work and “promote federal policies that support the growing on-demand economy and urge Congress to think more ambitiously when it comes to modernizing our nation’s labor laws.”
Similarly, Lyft has launched political action committees to work on independent contractor legislation in Illinois and New York, according to Vice. The company formed the Illinois PAC in June and has contributed $1.2 million to the cause. Called Illinoisans for Independent Work, Lyft’s PAC sent out mailers, bought digital ads and donated to 50 political candidates’ campaigns in Illinois for the November election. The PAC’s website is mostly bare and just says, “We’re fighting for Illinois Workers and their right to independence.”
The gig economy companies say the battle over gig worker status is existential. If they’re required to classify drivers as employees, the companies will have to pay for drivers’ health insurance, minimum wage and sick leave — adding high costs that the companies say could hurt their bottom lines. Uber, Lyft and DoorDash aren’t yet profitable. According to Uber, about 7 million people in the US did gig work for at least one of the companies in 2019, with about 1 million of them working for Uber.
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As for gig workers, many say they need more labor protections from the companies. They say they struggle to pay rent and doctor bills, and to put food on the table, according to a survey by the Institute for Social Transformation at the University of California, Santa Cruz. Drivers and labor activists who opposed Proposition 22 say they too are planning to take their battle nationwide.
“The big platform companies may have won in California, but the gig worker fight has only just begun,” said Brendan Sexton, executive director of the Independent Drivers Guild, which represents 800,000 ride-hail drivers in New York, New Jersey and Connecticut. “California’s experience should light a fire under pro-worker state legislatures across the country.”
Schaal had been off work for five days when he got the email from Uber. He was home because he was waiting for results from a COVID-19 test after he’d been possibly exposed to the novel coronavirus while doing a gig job for Shipt, a delivery company owned by Target. He said he was already anxious about not making money that week, and the email just added to his worries.
“It just came out of the blue,” Schaal said. “I don’t see any net positive effect of allowing the companies to force the definition of what we are down our throats.”
“You can change the narrative based on the degree to which you’re being responsive to your users — all through an app. That is a marketing goldmine,” said David McCuan, a political science professor at Sonoma State University. “That is the power of Big Tech.”
Uber’s messages to California drivers included asking them to record 30- to 60-second videos of themselves describing why flexibility is important. But that campaign brought backlash. Drivers filed a lawsuit against Uber in October alleging they feared retaliation if they didn’t participate in the company’s in-app surveys. In response, Uber told the court it would stop political polling on the app in California. A judge later rejected the lawsuit.
Other tech heavyweights have used similar strategies in the past, but not to the scale of the gig economy companies. Earlier this year, Google tried to stamp out a bill in Australia that would require it to pay local news outlets. The company wrote an open letter to users arguing the bill would make search “dramatically worse,” then linked to the letter on its Australian homepage.
In 2012, internet companies protested against the Stop Online Privacy Act and the Protect IP Act, two bills the tech industry saw as threatening to free expression and innovation. Google blacked out the corporate logo on its iconic home page and, if someone clicked on it, sent users to a “End Piracy, Not Liberty” petition. Mozilla did the same with its Firefox browser. Wikipedia shut down for 24 hours, instead only showing a darkened page that said “Imagine a World Without Free Knowledge.”
The gig economy companies’ win on Proposition 22 could inspire other tech companies to take advantage of captive audiences. But giants like Google and Facebook probably won’t overuse their platforms as soapboxes, says Jack Poulson, founder of watchdog nonprofit Tech Inquiry. Those bigger companies are more likely to use lobbyists to get out their messages. Though Uber uses lobbyists as well, Poulson says, it’s much more freewheeling with its public image.
“With Uber, their brand has been through the mud,” said Poulson. “They take a bit of a mercenary tone.”
The ‘third way’
Uber has been laying the groundwork for its national push on gig worker status over the past couple of years, but in late March it made a splash bringing its idea to the public.
As the coronavirus raged across the country, Uber CEO Khosrowshahi sent President Donald Trump a letter seeking help. He began the three-page letter asking the government to include independent contractors in its economic stimulus package. He then laid out his case for changing labor laws to create what he called the “third way.”
The idea, he said, is to invent a new category of workers who’d be classified as independent contractors but get a few more perks. He implied that current labor laws could end up hurting gig economy companies, saying, “each time a company provides additional benefits to independent workers, the less independent they become; and, without legislative clarity, the more uncertainty and risk the company bears.”
Since then, Uber has expanded on its “third way” plan with its white paper, nationwide survey and a New York Times op-ed by Khosrowshahi discussing the new worker model. The 18-page white paper says it’s intended to encourage dialog among a wide range of stakeholders and emphasizes the “urgent need for new high-quality independent work.” The paper outlines Uber’s plan to work with governments to give independent contractors some benefits that employees already have, such as accident insurance and protection under discrimination laws.
“In the early days, at least in this generation of startups, the founders didn’t take politics seriously,” said Bradley Tusk, Uber’s first political advisor and CEO of consulting firm Tusk Strategies. “That’s changed.”
In the first half of 2020, Uber hired a record number of 40 lobbyists and spent $1.2 million lobbying the federal government, according to Open Secrets. Lyft also shelled out more than it had in the past for federal lobbying, spending $760,000 and hiring 36 lobbyists in the first half of the year.
Though Uber and Lyft have been laying the groundwork to change labor laws federally, Tusk said that may be an uphill battle under the administration of Democratic president-elect Joe Biden. Both Biden and Vice President-elect Kamala Harris publicly opposed Proposition 22. And since getting elected, Biden has promised to tackle gig economy companies that classify workers as independent contractors.
“This epidemic of misclassification is made possible by ambiguous legal tests that give too much discretion to employers, too little protection to workers, and too little direction to government agencies and courts,” reads Biden’s plan on worker empowerment.
An easier path for the “third way” would be a state-by-state option, Tusk said. That fits right in with Lyft forming the PACs in Illinois and New York. And an Uber spokesman told CNET the company is also in talks with lawmakers in various states, but declined to specify which ones. “We are pushing to give drivers new benefits and protections in other states — a proposal that drivers nationwide strongly support,” the spokesman said.
It’s unclear if lawmakers in Minnesota, where Schaal lives, are meeting with the gig economy companies. The only information Schaal said he’s received from Uber was the email urging a federal plan.
Schaal said he went back to work doing deliveries and giving rides after his COVID-19 test came back negative. He’s not sure what the right approach is on defining gig workers, but he’s certain that safeguarding workers’ rights is crucial and government officials should take that into account when changing any laws.
“More and more we are at this crossroads where we are defining the next class of American worker,” Schaal said. “We need to make sure we have certain rights and protections.”
Over the weekend, a TikTok video went viral advertising a tip to bypass waiting in long lines for COVID-19 testing: hiring a gig worker to wait for you.
A now-deleted TikTok video from user @thetipguyNYC explains that viewers looking to hire someone else to wait for hours among possibly-infected people should use TaskRabbit, a platform for hiring people to do just about anything you don’t want to. The video advises viewers to “filter by cheapest available” and to instruct the worker to give them a call when they’re at the front of the line.
In a statement, TaskRabbit said it is aware of the practice of hiring workers to wait in line for COVID-19 tests, and that it’s fine with it.
“The Wait in Line category has historically been popular during the holidays,” a TaskRabbit spokesperson told Motherboard. “This year, there are some Taskers choosing to wait in line for clients seeking COVID-19 tests.” They also added that “because details of all tasks are shared by clients in advance, Taskers know the types of lines in which they will be waiting, and the decision about whether to accept the task lies with the Tasker.”
One person who did this toldTime Out that they couldn’t “fathom how people can disagree—it’s giving people jobs who may have lost theirs during this pandemic, so if they do it and get paid for it, that’s their decision.” They blamed access to testing and “the lack of organization” for the lines, adding that “people should absolutely be taking the opportunity to get paid for it.”
All of that conflicts with what’s actually going on, however. Some of the overcapacity is from a lack of adequately distributed resources, but another part is thanks to the hordes of people who are ignoring CDC guidelines and planning to travel for Thanksgiving.
The pandemic has already led to an increase in demand for gig work (for example, food delivery) while exacerbating the divide between those who deliver and those who make the orders from behind phone screens at home. People need money in the middle of a massive employment crisis during a plague, but it doesn’t justify the exploitative work that has popped up in the gap in lieu of a competent and compassionate societal response.
Masses of out-of-work people standing in line for a COVID-19 test on behalf of wealthy people ignoring guidance that could end the pandemic isn’t any kind of solution, it’s a perfect example of why things got this bad to begin with.
Assembly Bill 5, (AB 5), signed by Governor Gavin Newsom in September of 2019, which went into effect on Jan. 1, 2020, codified the California Supreme Court’s landmark decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles. Dynamex created the presumption that a worker is an employee rather than an independent contractor unless the hiring business can prove each prong of an ABC test, as follows:
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Though AB 5 outlined a number of exemptions, the law left many who previously relied on contractor work confused as to how to classify workers that would no longer be presumed independent contractors under the strict ABC test. Dissatisfaction with the new law quickly led to challenges at the Legislature, leading to the passage of AB 2257 and approval of Proposition 22 by voters this year.
AB 2257, drafted by the same author of AB 5, was signed into law by Governor Newsom on Sept.4, 2020. The bill primarily relates to creative work. Under AB 5, certain specified occupations and business relationships were exempted from the application of the ABC test. AB 2257 revised and recast these provisions substantially. The bill additionally specifically exempts certain occupations in creating, marketing, promoting, or distributing sound recordings or musical compositions. The law exempts a musician or musical group for the purpose of a single-engagement live performance event, and an individual performance artist presenting material that is their original work and creative in character, and the result of which depends primarily on the individual’s talent.
AB 2257 narrowed the professional services exemption for services provided by still photographers, photojournalists, freelance writers, editors, and newspaper cartoonists. The bill establishes an exemption for services provided by still photographers, photojournalists, videographers, or photo editors (as defined under law) who work under a written contract that specifies certain terms, subject to prescribed restrictions. The bill also establishes an exemption for services provided to a digital content aggregator (as defined under law) by a still photographer, photojournalist, videographer, or photo editor, and establishes an exemption for services provided by a fine artist, freelance writer, translator, editor, content contributor, advisor, narrator, cartographer, producer, copy editor, illustrator, or newspaper cartoonist who works under a written contract that specifies the terms, subject to prescribed restrictions.
While the majority of the changes established by AB 2257 relate to creative work, the bill also created additional exemptions for certain other narrowly tailored professions and occupations, such as for people who provide underwriting inspections and other services for the insurance industry, manufactured housing salespersons, people engaged by an international exchange visitor program, consulting services, animal services, and competition judges with specialized skills. The bill also creates exceptions for licensed landscape architects, specialized performers teaching master classes, registered professional foresters, real estate appraisers and home inspectors, and feedback aggregators.
The bill revised the conditions under which business service providers providing services pursuant to contract to another business are exempt. The bill also revised the criteria under which referral agencies and service providers providing services to clients through referral agencies are exempt and revised the applicable definitions.
Finally, AB 2257 created an exemption for business-to-business relationships between two or more sole proprietors, and provides that a hiring entity need only satisfy all of the conditions of one of the exemption provisions to qualify for the exemption from the ABC Test.
With respect to enforcement, AB 2257 expanded the possibility of enforcement actions by authorizing any District Attorney to prosecute an action for injunctive relief, in addition to the Attorney General or any City Attorney authorized previously by AB 5.
On Tuesday, Nov. 3, 2020, California voters overwhelmingly passed Proposition 22. Proposition 22, the most expensive initiative sponsored in California history, backed by Uber, Lyft, and Doordash, codifies the Protect App-Based Drivers and Services Act drafted in response to the restrictions passed under AB 5.
Many companies utilizing contractors have difficulty meeting the B-prong of the ABC test, and thus face significant misclassification risk. This is especially so in the gig economy, where contractors are used to perform work that a hiring entity is in the business of providing to end-customers. AB 5 provides little to no relief for employers within the gig economy, as none of the enumerated exemptions apply.
Proposition 22 is targeted to the gig economy and carves out a specific exemption from AB 5 for “app-based drivers” retained by “network companies.” The Proposition defines “app-based driver” as an individual who is a courier or driver for a company that maintains an online-enabled application or platform used to facilitate delivery services on an on-demand basis or to connect passengers with drivers using a personal vehicle. App-based drivers will be presumed independent contractors so long as a minimum standard is met:
the network company does not unilaterally prescribe specific dates, times of day, or minimum hours during which the app-based driver must be logged into the platform,
the network company does not require the app-based driver to accept any specific rideshare services or delivery service requests as a condition of maintaining access to the platform, and
the network company does not restrict the app-based driver from working in any other lawful occupation or business. These requirements emulate the A-prong of the ABC Test and traditional jurisprudence on independent contractor classification.
Proposition 22 provides a number of legal employment benefits and protections that are required in California for workers classified as employees. For example, app-based drivers now have a guaranteed “net earnings floor” comprised of 120 percent of the applicable minimum wage of the worker’s “engaged time,” guaranteed tips and gratuities, and a guaranteed quarterly healthcare subsidy. For drivers that average 25 hours per week of engaged time during a calendar quarter, the subsidy will equal 82 percent of the average California Covered premium for each month. And for drivers who average between 15 and 25 hours, the subsidy will equal 41 percent of the average California Covered premium. Proposition 22 also requires the applicable companies to provide occupational accident insurance to cover at least $1 million in medical expenses and lost income resulting from injuries suffered while a driver is online, and disability payments of 66 percent of a driver’s average weekly earnings before the injuries suffered. Proposition 22 further requires the applicable company to provide accidental death insurance for the benefit of a driver’s spouse, children, or other dependents when the driver dies while using the app.
In addition to the employment-like pay benefits, Proposition 22 requires network companies to develop anti-discrimination and sexual harassment policies, and develop training programs for drivers related to driving, traffic, accident avoidance, and recognizing sexual assault and misconduct. The ballot measure also criminalizes the impersonation of an app-based driver as a misdemeanor.
Proposition 22 is most likely here to stay. The new law contains a provision which permits the Legislature to amend the law only with a statute passed in each house by seven-eighths of the membership. While a big win for gig economy companies using app-based drivers, Proposition 22’s reach is otherwise very limited. It only applies to companies that maintain an online-enabled application or platform used to facilitate delivery services on an on-demand basis, who also maintain a record of the amount of engaged time and miles accumulated by its couriers, or “transportation network companies” as defined in Public Utilities Code section 5431. i.e., a company operating in California that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle. In other words, taxi or courier service companies that utilize an online platform to provide on-demand service are the only ones benefiting from the new law.
In sum, Proposition 22 creates a separate classification for app-based drivers. App-based drivers are thus no longer independent contractors or employees in the traditional sense, but rather a hybrid maintaining the independence traditionally enjoyed by contractors with some of the benefits and protections mandated for employees. The overwhelming support for this new classification in California could see ripple effects across the nation where app-based driving companies operate. Likewise, other industries that utilize an app-based model to provide services by contract workers to end-consumers may see value in developing similar legal exemptions for their gig workforce. Further changes to AB 5 or the expansion of Proposition 22-like legislation for other sectors are therefore expected while the law and the economy reconcile how to deal with the gig economy.
Proposed Temporary Amendment To Facilitate Option-Based Awards To Gig Workers
26 November 2020
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The Securities and Exchange Commission released for comment
proposed rules that would apply on a temporary basis to allow for
broader reliance on Rule 701 and Form S-8 for stock-based
compensation related awards to gig or platform workers. These
workers may not be employees or consultants eligible to receive
stock-based awards under current Rule 701. The proposed rules would
amend Rule 701 by adding a temporary rule provision that, for five
years, would enable issuers to use Rule 701 to compensate certain
platform workers, subject to specified conditions. An issuer would
be able to use the exemption to issue its securities on a
compensatory basis to platform workers who, pursuant to a written
contract or agreement, provide bona fide services by means of an
internet-based platform or other widespread, technology-based
marketplace platform or system provided by the issuer. Under the
proposed amendments, these offerings would be able to be registered
using Form S-8. The amendments would be available on a temporary
basis in order to allow the SEC to assess whether there are any
unintended consequences. The proposal will be subject to a 60-day
public comment period.
See the SEC press release and fact sheet here, as well as the proposing release here.
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