(Bloomberg) -- Uber Technologies Inc., Lyft Inc., and DoorDash Inc. are putting $90 million behind a ballot measure strategy to ensure they don’t have to reclassify their California workers as employees.
Ride-hailing and food-delivery companies that rely on contractors who aren’t guaranteed employment protections like overtime and unionization have been scrambling to address the threat posed by a state legislative proposal that would make it much harder to claim their workers aren’t employees.
Assembly Bill 5 passed the state Assembly in May and is poised to go to Governor Gavin Newsom next month if it clears the Senate. The legislation would codify a 2018 state supreme court ruling that designates workers as employees if they are doing work that isn’t outside the usual course of a company’s business, and would apply that standard to a wide swathe of state laws.
Firms including Uber and Lyft, which have waged court battles with drivers over their status for years, have sought for months to secure a deal with labor leaders and lawmakers that would give drivers new perks but avert reclassifying them as employees. Those deal-making efforts have suffered some recent setbacks. One of the unions that the companies have been meeting with this year, the International Brotherhood of Teamsters, last month signed onto a letter expressing opposition to “any legislative proposal allowing technology platform companies to exploit workers by treating them as independent contractors with substandard protections.”
Newsom, a Democrat seen as both tech-friendly and as an ally of labor, has been publicly and privately pushing for a compromise. On Wednesday, he and his chief of staff, Ann O’Leary, met with Lyft President John Zimmer and Uber Chief Legal Officer Tony West on the topic.
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O’Leary said in a statement Wednesday that the administration was “aggressively fighting for the right of workers to organize and earn higher wages,” and that “a key goal” of ongoing talks was to achieve “real collective bargaining rights” for ride-share drivers.
Uber and Lyft say they remain hopeful a deal can be reached. But as a fallback, each company is placing $30 million into a campaign account for a potential 2020 ballot measure that would declare their workers non-employees while establishing a new set of perks. Consultants have been hired, research and polling have been conducted, and language has been drafted for a ballot measure, an Uber spokesman said. “We remain focused on reaching a deal, and are confident about bringing this issue to the voters if necessary,” Lyft spokesman Adrian Durbin said in an emailed statement.
The on-demand delivery app DoorDash said Thursday that it was committing $30 million of its own cash to a separate campaign account. Public policy head Max Rettig said in a statement the company was “fully committed to a legislative solution,” but “should the legislature fail to act, we will be left with no choice but to pursue a ballot initiative.” A DoorDash spokesman said that if a ballot measure became necessary, the company was confident that platform firms would be unified behind a single ballot measure.
California Labor Federation head Art Pulaski said the state’s labor movement was “unified in opposing” the companies’ “cynical measure,” and would “meet the gig companies’ absurd political spending with a vigorous worker-led campaign” to defeat it.
Pulaski said in a statement that the companies’ ballot measure campaign shows that they “never cared about their drivers or workers. The only thing they care about is their bottom line and making their executives even richer than they already are.”
Assemblywoman Lorena Gonzalez, the author of A.B. 5, cast the companies’ new announcement as part of the state’s “long history of Wall Street billionaires pumping a fortune into ballot measures to further erode the middle class.”
A spokesman for the governor declined Thursday to comment on the potential ballot measure.
The ride-hailing companies say that as part of a legislative deal to preserve their drivers’ non-employee status, they are offering to guarantee drivers payment of $21 an hour, including expenses, for the time during which they are headed to a pick-up or transporting a rider. They would also create a company-funded benefits system and establish a first-of-its kind sectoral bargaining process in which labor and companies would negotiate over standards for the whole industry.
A summary of the proposal provided by Lyft notes that prominent labor leaders have called for bringing such sectoral bargaining to U.S. labor relations, and says it “can serve as a model to protect workers across industries and across the nation.” If the companies have to pursue the ballot measure, the perks it provides might not include everything the companies are currently offering in talks, an Uber spokesman said.
In an interview with Bloomberg Television on Thursday Uber Chief Executive officer Dara Khosrowshahi said the deal would benefit drivers. “This is real money and these are real rights and you get the flexibility that every single Uber driver or courier wants,” he said. He also added that drivers wanted the freedoms afforded by contract work: “Flexibility is absolutely something that all of our drivers prize.”
The companies have also been contacting drivers and customers this week via in-app messages and emails, including one Lyft sent to drivers warning them that A.B. 5 as currently written “may require Lyft to offboard hundreds of thousands of drivers, and remove the flexibility to choose how and when you drive.”
Some labor advocates in California and elsewhere have voiced concern that compromises denying app-based workers full employee protections would encourage more companies to use technology as an excuse to evade hard-won standards.
“I think people are really playing with fire,” said David Weil, who leads Brandeis University’s social policy and management school and was head of federal wage and hour enforcement under President Barack Obama. “Creating carve-outs for this kind of model risks undermining the entire system of employment protections that we’ve had in place for decades.”
(Updates with DoorDash participation starting in first paragraph)
To contact the reporter on this story: Josh Eidelson in Washington at jeidelson@bloomberg.net
To contact the editors responsible for this story: Wes Kosova at wkosova@bloomberg.net, Andrew Pollack, Alistair Barr
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