Protesters have ralled against companies hiring app-based drivers such as Uber for not doing enough to protect workers. (Kevin N. Hume/S.F. Examiner)

Protesters have ralled against companies hiring app-based drivers such as Uber for not doing enough to protect workers. (Kevin N. Hume/S.F. Examiner)

Uber, Lyft and DoorDash bring their battle against AB5 to November ballot

Measure would classify app-based drivers as independent contractors, offer some additional benefits

Edan Alva has driven for Lyft since 2014, but when he lost his full-time job in San Jose two years ago, he turned to the platform as his primary source of income. He quickly found living in the Bay Area on the money he earned was “pretty much impossible” once he subtracted the high costs of car repairs for flat tires or a cracked windshield, sick time and gas money from his revenues.

“What you earn is barely enough to keep you in existence. There’s no ability to save, no ability to think of retirement, no ability to keep money for a rainy day,” he said, adding he couldn’t afford reasonable health insurance for himself and his teenage son.

Alva has become an outspoken critic of the rideshare and on-demand delivery platforms and a driver organizer for Gig Workers Rising, a coalition of app-based drivers and workers fighting for improved working conditions and the right to unionize. The group was a major influence in last year’s passage of AB 5, the statewide law that mandates companies like Uber and Lyft classify their workers as employees rather than independent contractors to guarantee them basic labor protections and pay.

But the ride-hail behemoths are fighting back with a $110 million punch in the form of Proposition 22, a November ballot measure that will ask voters to exempt them from the law, allowing them to maintain drivers as independent contractors and provide some modest protections to their workers instead of the more robust rights guaranteed by state labor law.

“These companies are trying to skirt labor law,” said Steve Smith, communications director for the California Labor Federation, which includes 1,200 labor unions in its membership roster. “It’s a way for these companies to continue to mistreat their workers and put the the safety of their consumers at risk.”

Under the initiative, app-based companies including Uber, Lyft, DoorDash, Instacart and Postmates, would be granted a specific set of labor and wage policies. Their drivers and delivery-persons would remain independent contractors, and, in exchange, companies would guarantee certain benefits such as a net earnings floor, health care subsidies for some, disability benefits if injuries are sustained while driving passengers and some protections on overtime work, rest periods and sexual harassment.

“I think their hearts were in the right place, but they really got the details wrong,” Stacey Wells, spokesperson for the Protect App-Based Drivers and Services coalition, which receives funding from the three companies, said of AB 5. “It was a 20th century piece of legislation trying to adapt to 21st century work styles.”

At the crux of the debate for many drivers themselves is schedule-setting. They can currently choose their own schedules, and although AB 5 doesn’t mandate companies limit hours or reduce flexibility, Wells says it would be a natural consequence of higher costs associated with hiring employees instead of contractors.

“Show me a profession where you can decide to become an employee by downloading an app and then start working, without anybody having any oversight, and just start earning money,” she posited. “Under an employment model, companies won’t allow that.”

Drivers who support the measure say they’re satisfied with the benefits provided, especially since it allows them to keep the flexible, set-your-own hours schedule they currently enjoy.

“Not being to work at my discretion would change my life completely. I don’t know if I could sustain having my daughter,” said Rudy Valdivia, a driver for Uber and UberEats who says he makes most of his money early in the morning or while she’s at school.

Valdivia uses the apps as his full-time job, and he works between 40 and 45 hours most weeks. He says if he ever comes up short, he can always sign back into the app and drive extra hours for more cash.

To say the corporations are fighting only for the flexibility of their workers would be misleading.

They’re also fighting for millions of dollars in saved tax payouts. One estimate from the Berkeley Labor Center estimates Uber and Lyft would have contributed $413 million into California’s unemployment insurance fund between 2014 and 2019 if their workers had been classified as employees. They’d be on the hook for even more money if contractors became employees because they’d be liable for accidents or traffic collisions, for example.

And the future of their business model could be at stake. Wells pointed to projections from the Berkeley Research Group that costs would rise, management would “discontinue flexibility to control operating costs” and companies would need 80% to 90% fewer workers to satisfy the lower demand brought on by rising prices for customers.

Opponents scoff at the idea that corporations valued at billions of dollars can’t afford the higher price.

“These are some of the wealthiest companies not only in California, but in the world, yet they can’t provide the basic protections to their workers that all other companies do,” Smith said.

Nuts and bolts

Proposition 22 would provide “a new path between traditional style employment and nothing,” according to Wells. “It gives people a better future based on how labor is done today.”

The coalition in favor points to the health care stipend and pay floor as hallmark evidence the hybrid model can provide benefits to workers and financial sustainability to the companies.

As independent contractors, drivers who work 25 hours per week would receive a health care stipend of $367 each month, which is equal to 100% of the average employer payment toward a Covered California Plan, according to Wells. Anyone who works 15 hours per week will receive half of that stipend.

The coalition claims the initiative will guarantee drivers receive pay equal to 120% of the hourly minimum wage — $15.60 next year — and reimbursement up to 30 cents per mile while driving passengers for an estimated total of $21 per hour.

A report from the Berkeley Labor Center, which Wells says misrepresents the financial realities of the app-based companies, estimates the hourly pay is closer to $5.64 hourly due to a number of loopholes including lack of payment for waiting time and low-ball calculations on how much to reimburse drivers per every mile with passengers.

The report also says the pay claim doesn’t factor in the costs borne by the driver for not receiving paid rest breaks, paid sick leave, unemployment insurance and other benefits, and estimates the overwhelming majority of drivers wouldn’t work enough to qualify for the full health care stipend.

Other benefits include occupational accident insurance for illnesses or injuries sustained on the job, protection against sexual harassment or discrimination and enhanced measures to guarantee public and driver safety.

Smith recognizes bringing people on board as employees is the more expensive option, but he also emphasizes it’s legally the only option for most other companies.

“When we allow companies like these to cheat, it not only hurts workers and consumers, but it also hurts businesses that are doing the right thing. It creates a competitive disadvantage to actually following the law,” he said. “The ballot measure is nothing more than an effort to get around the law and to spend $100 million to write something that only applies to them.”

Case for exemption

Many of the app-based companies have gone to great lengths to make their cases against AB 5, but Uber, in particular, has a long history of legal maneuvers.

In a 2017 case in Atlanta, Uber attorneys said itwasn’t a transportation company, and in 2019 its chief attorney insisted the work of the platform’s drivers is “outside the usual course of business,” pulling specific language from the three-prong test set forth by AB 5 to determine if someone can legally be considered an independent contractor.

While voters will have to wait until November to make their final judgment on Proposition 22, companies like Uber and Lyft will continue to fight a series of legal battles before election day.

California’s Attorney General, along with the city attorneys in San Francisco, Los Angeles and San Diego, filed a preliminary injunction motion June 24 against Uber and Lyft to immediately halt their classification of drivers as independent contractors. They’re scheduled to argue in court in August.

The injunction followed a lawsuit from the same group in early May for the companies’ inaction which flouted the Jan. 1 effective date for AB 5.

The two rideshare companies filed a lawsuit of their own Tuesday in response to a “scoping memo” from the California Public Utilities Commission that said drivers are “presumed to be employees,” though the memo itself isn’t considered any kind of formal legal decision. Uber and Lyft assert the commission doesn’t have the power to make decisions on their drivers’ status.

Alva stopped driving for Lyft in early April, and he said he won’t get behind the wheel again until he feels protected enough to do so.

“Bottom line, there should never be a precedent for employers gaining workforce without paying them the minimum requirements by law — basic labor protections and minimum wage,” he said. “If we allow that to happen, it would spread like cancer.”

cgraf@sfexaminer.com

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