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By Scout Burchill

November 27, 2020

Summary:

While the presidential election earlier this November was still brimming with controversy and suspense, major tech companies Uber, Lyft, Doordash, Instacart and Postmates were celebrating a massive victory with the passage of California’s Prop 22. Passing with 58% of the vote, the proposition will provide exemptions to app-based rideshare and delivery companies from a California labor law called AB5, which was passed in 2019 and extended employee protections to gig economy workers.

Under Prop 22 (officially titled: “Exempt App-Based Transportation and Delivery Companies from Providing Employee Benefits to Certain Drivers”)  rideshare drivers and delivery workers essentially remain as contractors and are not entitled to employee benefits. This means these workers are not entitled to typical employee benefits afforded under law such as minimum wage, overtime, expense reimbursement, paid sick days, paid family leave, employer healthcare options, or unemployment insurance. In effect, these exemptions created a new class of workers specifically for these app-based companies and allowed the companies themselves to set labor and wage policies rather than the state legislatures.

The importance of Prop 22 cannot be overstated. Silicon Valley spent more than $200 million, the most ever spent in the history of U.S. ballot measures, to ensure the success of their ballot initiative. On top of this massive pile of cash, app-based companies used their apps to bombard drivers and riders with messages claiming drivers would lose their jobs and riders would face longer wait times and higher prices if Prop 22 failed to pass. App-based delivery companies had their workers include stickers and delivery packages emblazoned with “Yes on Prop 22” to customers. Uber and Lyft executives also threatened to end operations in California if Prop 22 did not pass. On the No side, labor groups raised around $20 million, meaning they were outspent by about 10 to 1.

The passage of Prop 22 is a massive victory for Silicon Valley and the gig economy as a whole, and it brings to the fore an increasingly pressing conversation about labor rights and tech companies that the Biden administration will have to answer to. Although Joe Biden and Kamala Harris urged California voters to reject Prop 22, their own political connections suggest a more complicated picture.

Analysis:

The ballot initiative for Prop 22 is essentially a response by these companies to the State of California suing them for incorrectly classifying their workers as contractors. Rather than take the risk of losing in court, tech companies, specifically Uber, Lyft, Doordash, Instacart and Postmates, created this ballot initiative, threw an unprecedented amount of money behind it and practically wrote their own labor laws. The result is that drivers that work for these app-based rideshare companies are denied the rights of both employees and, in a sense, contractors as well, seeing that a typical contractor would be able to set their own rates. According to an independent study by the Labor Center at the University of California Berkeley, after considering the multiple loopholes for these tech companies in the initiative, the pay guarantee promised by Uber and Lyft for drivers under the new initiative comes to a measly $5.64 an hour. Much of these loopholes are the result of only counting a driver’s time “engaged” with passengers and not reimbursing drivers for the cost of driving while not engaged, among other things.

The battle over Prop 22 offers a glimpse into the future of corporate politics and the labor battles ahead, especially as the gig economy expands and becomes a larger part of the formal economy. Moreover, it offers a bleak preview of what workers are up against.

There is a growing awareness  that much of the “innovation” in the tech world involves the skirting of labor laws and the exploitation of loopholes in regulation and grey areas in the law. While there is a strong and persuasive case to be made that there does indeed need to be a rethinking of labor laws particularly for gig economy workers, it’s hard to argue that the companies themselves should be writing these laws. Prop 22 includes the provision that it can only be overturned by a seven-eighths vote of the state legislature or a new ballot initiative. That’s a pretty tall order. However, state labor laws can be superseded by federal labor laws, which is where the stance of the Biden administration becomes really important.

President-Elect Biden and Vice President-Elect Kamala Harris openly opposed Prop 22 during the presidential campaign. In his November 16th speech on the economy, Joe Biden declared that he will be on the side of American workers and talked at length about the importance of unions and proclaimed that he was a “union guy.” His website explicitly makes the case that he will aggressively pursue companies that misclassify their workers as contractors and there has been reporting that he has plans to implement California’s AB5 labor law as a model for reforms at the federal level. These are all good signs for workers and labor rights proponents, however, the circles that surround the Biden administration suggests a more nuanced story.

Vice president-elect Kamala Harris’s close ties to Silicon Valley are widely known. Early in her career as a prosecutor, working as the district attorney for San Francisco, she forged strong relations with Big Tech and Silicon Valley. Later, Silicon Valley’s backing and donations helped her get elected as the attorney general of California. As attorney general, Harris allowed tech companies to grow unchecked and did very little to curb Big Tech’s growing power and influence. Big Tech became Big Tech largely under her watch.

As an example of how deep these relations go, the legal chief officer of Uber and leading advocate of Prop 22, is Kamala Harris’s brother-in-law, Tony West. West, as well as Silicon Valley as a whole, were major fundraisers for the Biden campaign. The connections between Silicon Valley and the Biden administration are well known and trace back to the Obama administration. A large number of Obama administration officials have worked on behalf of Big Tech. Seth Harris, the former Secretary of Labor and member of Obama’s cabinet, actually wrote the proposal for Uber and Lyft that called for a new categorization of workers for app-based companies. According to reporting at Politico, Harris is currently under consideration for the Department of Labor. Furthermore, Jake Sullivan, Biden’s pick for National Security Advisor, has previously consulted for Uber and Lyft as an associate working for the geo-political risk advisory firm Macro Advisory Partners.

All things considered, the Biden administration will have to find a balance between tech interests and the interests of American workers. App-based rideshare and delivery companies such as Uber and Doordash are examples of a specific type of tech company that deserves extra scrutiny. In evaluating the costs and benefits of these types of companies it is worthwhile asking the larger question of whether these companies actually add value to our society. Uber, Doordash and the rest are astoundingly unprofitable, losing billions of dollars every year. However, as “tech companies” with the backing of enormous piles of money from venture capital firms and massive economies of scale built on these investment dollars, these companies have convinced many of their value with promises of future profitability. Others however have already begun questioning whether these business models can ever truly be sustainable.

These points are worth our careful consideration especially when weighing the labor rights for the workers of these companies. If their business model relies on the exploitation of labor and still fails to turn a profit, what is the end game here? Driverless cars maybe? In the meantime, how much must workers lose in order for these companies to actually turn a profit? The downstream effects of these services to our society are hard to calculate. Riders do not bear the actual costs of these services, and if they did they may not be as inclined to use them. In a sense, customers using these types of app-based services are heavily subsidized by tech companies burning piles of cash and skirting labor laws. What if, for example, the ‘subsidies’ every customer enjoyed while using Uber and Lyft went instead to building and investing in a more reliable and modern public transportation infrastructure? There probably exists alternative ways of operating these services that are both fairer and financially viable, but as they currently exist the question of who really benefits from these services remains open to interpretation.

Resistance Resources:

Understanding Prop 22:

https://ballotpedia.org/California_Proposition_22,_App-Based_Drivers_as_Contractors_and_Labor_Policies_Initiative_(2020)#Overview

UC Berkeley’s Study of Uber and Lyft Wage Guarantees Under Prop 22:

https://laborcenter.berkeley.edu/the-uber-lyft-ballot-initiative-guarantees-only-5-64-an-hour-2/#:~:text=After%20considering%20multiple%20loopholes%20in,minimum%20wage%20was%20that%20low.

Human Rights Watch on Prop 22:

https://www.hrw.org/news/2020/11/09/california-prop-22-strips-gig-workers-minimum-wage

Organizations Working on Behalf of Gig Workers

https://gigworkersrising.org/

https://www.wedriveprogress.org/

https://www.gigworkerscollective.org/home

Excellent Articles to Better Understand the Harmful Business Practices of DoorDash

https://themargins.substack.com/p/doordash-and-pizza-arbitrage

https://themargins.substack.com/p/doordash-and-societal-arbitrage

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