Falling Back To Earth
California’s rejection of ride-hailing drivers as contractors undoes the entire gig economy
In California Labor Bill, Near Passage, Is Blow to Uber and Lyft, Kate Conger and Noam Scheiber offer a comprehensive review of the missteps by Uber and Lyft in California leading up to the vote expected this week in favor of Assembly Bill 5, which will require the ride-hailing companies to treat drivers as employees and not as contractors.
The bill is based on a 2018 CA Supreme Court ruling that determines that a worker must be classified as an employee if they perform a function central to a company’s business. So an accountant doing the books can be a contractor, but if your business is providing rides to passengers, the drivers are employees. Period.
The implications go far beyond ride-hailing:
The measure could affect millions of Californians beyond ride-hail drivers, including janitors, nail salon workers and cable-television installers. And it would give momentum to an emerging consensus on the center-left that workers are entitled to a basic level of economic security that many Americans now live without. Several candidates for the Democratic presidential nomination have endorsed the bill, including Bernie Sanders, Elizabeth Warren, Kamala Harris and Pete Buttigieg.
“It’s hugely important because California is the birthplace and the center of app-based work, and because California has traditionally been a bellwether for the country around a lot of different progressive policies,” said Rebecca Smith, an expert on worker misclassification at the National Employment Law Project, which is part of a coalition seeking to enact a similar law in New York.
The article details how the labor unions rallied against the efforts of the ride-hailing companies to sidestep the bill and create an intermediate sort of classification for drivers, one that would spare the companies from taking on the costly benefits of employment and paying for the cars involved:
Industry officials have estimated that on-demand companies like Uber and the delivery service DoorDash see their costs rise 20 to 30 percent when they rely on employees rather than contractors, and Uber and Lyft have said in statements to prospective investors that being forced to make drivers employees could significantly affect their financial outlook. Since the prospect of a deal started to fade in late July, the stock prices of both Uber and Lyft have declined about 30 percent.
This is a question not only at the heart of ride hailing, but the foundations of the gig economy, which rests on a foundation of worker precarity and externalizing its costs.
I recently quoted Bastian Lehman, the CEO of Postmates, in The Starting Point and The Bottom Line for The Gig Economy, where he makes the right noises, concluding with this:
No competitive advantage should come at the expense of workers.
This should be the abiding insight of what is motivating AB 5, and the eventual reassessment of the economics of gig economy platforms.