Uber, Lyft, DoorDash, and California’s other gig companies emerged victorious Tuesday night, as voters endorsed a ballot measure that allows them to continue to treat hundreds of thousands of workers as independent contractors. Fifty-eight percent of the state’s voters approved Proposition 22, which repudiated a recent state labor law that would have required the companies to hire their drivers and delivery people as employees—and pay them traditional benefits, including health care, sick pay, and workers’ compensation. With a $200 million campaign, the companies pulled off what once seemed unlikely: reversing the work of state lawmakers and courts, which had sided against Uber and its peers.
Any Californian with eyes, ears, a cell phone number, or a working television likely heard from those pushing Prop 22. The campaign, the most expensive in California history, flooded airwaves with ads and mailboxes with pro-22 mailers. Supporters texted voters with frequency and vim. The companies filled their own apps with campaign-related messaging, prompting a group of Uber drivers to sue the company for coercing them into voting “yes” on the measure. (A state court judge dismissed the case.)
The urgency made sense: The gig companies believed that treating their workers as employees would disrupt the disruptors, driving their already precarious business models over the brink. One Barclays analysis estimated that shifting Uber and Lyft drivers to employee status in California would cost the companies hundreds of millions of dollars annually. The companies had threatened to leave California, or at least temporarily shut down service in the state, if they had lost. Now, gig workers’ independent contractor status in California is near-irreversible. The ballot measure can only be changed by a seven-eighths majority of the state legislature. Uber shares rose by 14 percent Wednesday, and Lyft shares by 12 percent.
The gig companies, which made their names by exploiting legal loopholes and gray areas, have found another way to win. “California is, in some sense, a bellwether for the gig economy,” says Benjamin Sachs, a professor of labor and industry at Harvard Law School. The companies’ willingness to spend big in the state, he says, proves how important the labor fight is to them, and how much they have to lose.
“I am very concerned about what [the Proposition 22 win] portends for the future of work in our country,” says Shannon Liss-Riordan, an attorney who has sued gig companies for labor-related issues in California and elsewhere. “They were able to change the law in a way that suited them and allows them to save labor costs at the expense of working people in this country.”
The California results likely will embolden the gig economy companies to mount similar campaigns in other states and cities where their business model is at risk. In a statement, Lyft spokesperson CJ Macklin called the ballot measure “a groundbreaking step toward the creation of a ‘third way,’” a reference to workers who aren’t quite employees and aren’t quite independent contractors, either. Uber CEO Dara Khosrowshahi advocated for a “third way” in a New York Times op-ed published in August, and successfully lobbied the White House earlier this year to include gig workers in coronavirus relief funds.
Proposition 22’s “third way” does not qualify gig workers for traditional benefits like sick pay, unemployment insurance, or paid family leave. But it will provide a new health care subsidy for those who work a certain number hours, some accident insurance and workers’ compensation, and 120 percent of the minimum wage for the time they spend completing tasks for the companies. That doesn’t include the time workers spend signed in and waiting for a job, which, for Uber drivers, can account for more than 30 percent of the miles they drive while signed on to work.
At the federal level, Congress could enact some kind of “third way” law—or mandate a stricter independent contractor test. The US Labor Department could also play a role in determining who gets treated as an independent contractor, and who as an employee. The Trump administration signaled last month that it’s considering more employer-friendly classification rules. Labor advocates say that reordering the country’s labor regime may prove a slippery slope. Companies are more likely to “downgrade” employees to quasi-independent contractor status than “upgrade” independent contractors, says Sachs, the law professor. That would make it harder for American workers to access benefits and protections.
“My hope is what happened in California yesterday is a real wakeup call,” says Liss-Riordan, the attorney.
Other states appear to be gearing up for their own fights over gig workers. Massachusetts sued Uber and Lyft in July, alleging the companies are breaking the law by not treating their drivers as employees there. At least four other states use the “ABC test” to determine whether workers are contractors or employees, which California adopted this year but will now no longer apply to gig workers. According to the test, workers are only independent contractors if they’re not under direct control of the company they work for, performing work “outside the usual course” of the company’s business, and performing the same kind of work for other companies.
Labor advocates are trying to stay optimistic, despite Tuesday’s loss. Organizing gig workers has always posed a challenge—workers churn in and out of gig work and don’t share a common workplace. One recent study of Washington, DC, Uber drivers found that a third don’t know any other current or former Uber drivers. Katie Wells, an author of that study and a Georgetown University geographer who studies the lives of Uber drivers, says Prop 22 is evidence that the gig worker organizers have made great strides in the last few years. “The fact that these companies had to spend $200 million to defeat a law—that says something,” she says.