Welcome

California Gig-Worker Law Leaves Some Lamenting It Came Up Short

June 10, 2021, 4:01 PM

Six months after California voters approved Proposition 22, allowing rideshare companies to keep their delivery drivers contractors in exchange for minimum-wage promises and benefits, some full-time drivers say they are getting less than what was promised.

While the $220 million campaign to pass the ballot initiative promised drivers “120% of the minimum wage,” a report from the University of California, Berkeley Labor Center estimated that real driver earnings will be $5.64 an hour. Many drivers who effectively work full-time by gigging for two or more companies may not qualify for all the Prop. 22 benefits, which apply only when certain hourly thresholds are met.

About 85 percent of drivers recently polled by San Francisco’s Tulchin Research, backed by the Service Employees International Union, said they don’t have the health insurance being offered by the rideshare companies, with some saying they don’t know how to access it.

“They touted the benefits of Prop. 22. We have a guaranteed wage. We have a health care stipend. But, if no one can take advantage, what’s the point?” said Harry Campbell, a former full-time driver for Uber Technologies Inc. and Lyft Inc. who runs the news site The Rideshare Guy. “They are less about helping drivers and more about fending off liability and appear labor friendly in the eyes of regulators.”

Meanwhile, Uber, Lyft, and other gig companies are touting Prop. 22’s “portable benefits” or “third classification” model in proposals in Massachusetts, New Jersey, Illinois, and Colorado, as well as to federal lawmakers.

“After Prop. 22 passed, there’s a lot of writing on the wall that the companies found their new strategy for the state and federal level,” said Brian Chen, a staff attorney with the National Employment Law Project. “This is slowly materializing. We are seeing mobilizing and sowing the seeds for such campaigns.”

Uber has made it clear its plan won’t stop in California.

“We always find a way through because of what I mentioned before, because of these different levers,” said Jill Hazelbaker, senior vice president of marketing and public affairs, at a June 7 Uber earnings call, acknowledging it will push forward with legislation and ballot initiatives in other states.

Uber, Lyft, Postmates, and DoorDash Inc., when asked about drivers’ complaints about Prop. 22, didn’t respond or referred comments to the Protect App-Based Drivers & Services Coalition, the lobbying arm that championed the voter initiative.

In a recent survey of 378 drivers by the Benenson Strategy Group, touted by Uber, four out of five respondents were happy that Prop. 22 passed. Of those, 75% believed that the initiative created a better future for app-based drivers, through flexibility, independence, or a stronger safety net.

California Case Study

Jerome Gage, a full-time Lyft and Uber driver in Los Angeles, loves gig work—chatting with passengers, setting his own schedule, all while not reporting to a boss. He has been full-time since 2018, and has steadily upped his hours from under 40 to more than 60 a week to reach his weekly goal of earning $1,000.

But Gage, who volunteers with the Mobile Workers Alliance, one of the groups that organizes app-based workers, says he’s come to believe he should be getting the benefits of being an employee. The benefits promised in Prop. 22 aren’t making him feel more secure, particularly as work was limited during the Covid-19 pandemic.

“The companies said if Prop 22 didn’t pass, we’d lose our flexibility, and that’s the most important thing to drivers,” he said. “There was a lot of clever language that promised things for drivers.”

To reach the “guarantee of 120% of the minimum wage,” as well as a separate expense reimbursement benefit, workers have to drive a certain amount of hours for a particular app. And the initiative’s guarantee only applies for time when drivers are engaged with passengers—not en route or picking up a passenger.

The Berkeley study estimated that “engaged time” only amounts to 67% of the drivers’ working hours. Under Prop. 22, drivers receive a 30-cents-per-mile reimbursement benefit to offset the cost of driving, but only for “engaged time” with passengers. The Internal Revenue Service estimates that the real cost of driving is 58 cents a mile. This represents only a fraction of true business expenses, the largest damages typically in misclassification litigation.

A health care stipend was also a draw, particularly when the pandemic hit and left many drivers without work. But Tulchin’s polling suggested that drivers didn’t know how to access the benefit or weren’t given clear guidance by the company, and that many drivers weren’t eligible.

The Benenson survey found similar results in the number of drivers who have received the healthcare stipend, though it said most of the drivers get it from another source.

Separately, some Uber drivers are angry that the company changed some of its policies that it put in place before Prop. 22 passed. This includes a “fare multiplier” tool that allowed workers to set their own rates. That helped bolster the arguments that drivers were independent.

The company said that it changed the policy earlier this year because it meant that fewer drivers would be available to customers.

Company Response

The companies continue to defend the model—and many drivers do want to remain independent contractors. Roughly 80% of drivers work fewer than 20 hours per week, and the majority work less than 10 hours per week, said Geoff Vetter, a spokesperson for the Protest App-Based Drivers & Services Coalition.

Prop. 22 was supported by 59% of California voters, including 120,000 drivers, the group says.

“Prop 22 guarantees the ability of California’s app-based rideshare and delivery drivers to continue working independently with the flexibility to choose when, where, and how long they want to work,” Vetter said in an email.

Campbell, though he didn’t vote for Prop. 22, said he supports the companies allowing workers to be independent contractors, preferably with more benefits.

For the majority of drivers who only work 10 or 20 hours a week, flexibility is key, he said. But he said the frustration of full-time drivers over Prop.22 is understandable, given that they count for as much as 60% of a company’s business and are coveted by all the app-based platforms.

“I get both sides and it’s a tough choice,” he said. “Everyone cares about higher wages, better customer support, no more unfair deactivation. I think I’m looking to less than the employee-independent contractor solution and more what can benefit every driver.”

VIDEO: App-based companies and state governments are at odds over how to properly classify gig economy workers.

State, Federal Battles

Legislation similar to Prop. 22 and others proposed in progressive states are meant to be a compromise to fend off measures that would make it harder for gig companies to defend their business models. The companies insist that their innovative models don’t fit into the decades-old employment structure.

A study by the Hamilton Project from 2015 that lays out the argument for modernizing labor laws was co-authored by Seth Harris, who has advocated for a “third classification” of workers who are contractors entitled to some employment benefits. Harris recently was appointed by President Joe Biden as the White House labor adviser.

The Labor Department has indicated it will take a closer look at classification, including the gig model, after scuttling a Trump-era, business-friendly rule for independent contractors. A new rule hasn’t been proposed.

Uber’s Hazelbaker said there probably won’t be significant changes to the gig business model at the federal level, but the company is talking to the Biden administration.

“The way we should understand this is as displacing current labor law for a certain class of workers,” said Sanjukta Paul, an assistant law professor at Wayne State University. “These laws look to displace any type of regulation.”

The state-level efforts are furthest along in Massachusetts, where a Prop. 22-style bill has been proposed. Like California, the state uses a stricter worker classification test that threatens gig companies. The state’s attorney general is challenging Uber and Lyft’s business model there.

“Now, they are targeting the states where there is a higher likelihood of misclassification being enforced,” said Shelly Steward, director of future of work at the Aspen Institute, which has promoted benefits that are “portable” from job to job. “For a long time we definitely saw this at the state rather than federal level. I think that’s where the next horizon will continue, but we are seeing interest at the federal level overall.”

To contact the reporter on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com

To contact the editors responsible for this story: Bernie Kohn at bkohn@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

To read more articles log in. To learn more about a subscription click here.