California projected to pass proposition to treat Uber drivers as contractors
Voters in trend-setting California backed a ballot proposal by Uber and its allies that cements app-based food delivery and ride-hail drivers' status as independent contractors, not employees, according to a projection by data provider Edison Research.
The result is one of the most closely watched decisions about the future of the gig economy, in a state that is home to app-based ride and delivery companies such as Uber and Lyft.
The measure, known as Proposition 22, marked the culmination of years of legal and legislative wrangling over a business model that introduced millions of people to the convenience of ordering food or a ride with the push of a button.
Companies described the contest as a matter of ensuring flexibility for a new generation of workers who want to choose when and how they work. Opponents saw it as an effort to exploit workers and avoid employee-related costs that could amount to more than $392 million each for Uber Technologies Inc and Lyft Inc, a Reuters calculation showed.
Investors on Tuesday appeared hopeful the measure would pass, with Lyft shares closing the day up 7% and Uber up 2.8%. The last voter poll from Oct. 26 showed a small lead in support for the proposition.
Uber, Lyft, Doordash, Instacart and Postmates, some of whom threatened to shut down in California if they lost, poured more than $205 million into what became the most expensive ballot campaign in state history.
In a last-minute attempt to sway voters, Uber in a Monday night email urged California customers to vote yes on the proposal, capping off months of intense campaigning that included billboards, frequent text messages and in-app push notifications.
"I'm so, so happy. I know it's right for the drivers, and I know it's right for the people who use the services," said retiree Jan Krueger, 62, who drives part-time for Lyft in Sacramento and got a "Mom Lyft" tattoo on her shoulder.
"Everybody is super concerned about (the companies) leaving or raising prices and not being available in remote areas," Krueger said of her passengers and driver friends.
The proposition was the app makers' response to a new California law that requires companies that control how workers do their jobs to classify those workers as employees.
The app companies argued the law did not apply to them because they are technology platforms, not hiring entities, and that their drivers control how they work.
Companies warned they could cut 80% of drivers, double prices and even leave California, if they were forced to pay benefits including minimum wage, unemployment insurance, health care and workers' compensation.
Uber, Lyft, DoorDash, Instacart and Postmates challenged the new law in court, but judges so far have ruled against them. Uber and Lyft recently lost an appeal, which would have narrowed their options if Prop 22 failed.
California represents 9%, roughly $1.63 billion, of Uber's 2019 global rides and food delivery gross bookings, and some 16% of Lyft's total rides.
Prop 22 leaves gig workers as contractors and provides them more modest benefits than are required under state law, including minimum pay while riders are in their cars, healthcare subsidies and accident insurance.
Company-sponsored surveys found that more than 70% of current gig workers do not want to be employees, but labor groups questioned those polls, saying drivers are divided.
Los Angeles Uber driver Christine Tringali said the companies' actions were shameful.
"How can someone fight so hard to avoid paying people a living wage and giving them job security? We work just as hard as anyone else," Tringali said.
First-time voter and college student Jonah Cervantes' mail-in ballot included a "yes" on Prop 22. He hopes to start driving for Uber or Lyft in a few months.
"It would be a lot harder for people to just hop on" as new drivers without Prop 22, said Cervantes.