Prop 22 Is Here, and It’s Already Worse Than Expected

Not only are gig companies gouging workers and consumers, but traditional firms are benefiting from the substandard labor regime as well.

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Damian Dovarganes/AP Photo

Just a handful of weeks have passed since California’s Proposition 22, a new labor standard concocted by Silicon Valley venture capitalists to lock rideshare and food delivery drivers out of basic employee wages, benefits, and protections, went into effect. It has arrived with a bang.

Already, companies beyond just the usual digital suspects have embraced the new law, which creates a third category of worker for those toiling in the gig economy, neither full-time employees nor independent contractors. That means no eligibility for state unemployment insurance, no guaranteed state minimum wage, stripped-down worker protections, no overtime pay, no sick leave, no workplace discrimination protection, and no right to collectively bargain.

To offset those obvious drawbacks, the ballot measure promised gig workers an hourly wage at least 120 percent of the local minimum while actively driving (though a UC Berkeley Labor Center study estimates the effective average wage under Prop 22 would be as low as $5.64 an hour); $0.30 reimbursement per engaged mile (lower than the IRS’s estimated $0.58-per-mile cost of owning and operating a vehicle); and a health care stipend for those who hit high weekly hours thresholds.

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Uber, Lyft, and DoorDash will benefit most from the new regime. But companies beyond the gig economy saw their opportunity to get in on the low-cost labor pool. In January, grocery giants Vons, Pavilions, and Albertsons announced that they’d be firing their full-time, benefits-receiving delivery staff, venerated just months ago as “essential workers,” and replacing them with subcontractors from DoorDash, which has secured a nationwide deal to take over the service. Only unionized staff was spared in the layoffs. That move is a startling sign of things to come, as companies realize that Prop 22 allows them to subcontract the same labor at a lower cost, making Uber, Lyft, DoorDash, Postmates, and Grubhub look more like traditional staffing agencies than innovative, high-tech products.

Meanwhile, health care stipends provided under the new Prop 22–devised “benefits” program are proving to be a pittance. Uber has offered no more than $400 a month toward health insurance for drivers who hit maximum hours standards, a small percentage of the overall cost (the average premium for the lowest level of coverage on the ACA exchanges for a family is $1,041 per month). To even qualify for the full stipend, workers must already be the primary policyholder on an existing plan and put in at least 25 “engaged” hours per week, excluding time spent waiting for jobs or driving to and from them. It takes about 40 hours of work to clock 25 hours of engaged time, according to the aforementioned Berkeley Labor Center study. DoorDash and Lyft have also added forced-arbitration clauses to workers’ contracts, which will make it functionally impossible for their workers to sue if those benefits are denied.

On top of that, those gig companies that paid handsomely to create and market Prop 22 to voters are now passing on the cost for these scant benefits to consumers. In late December, Uber announced that customers in California would see prices increase for rides and food deliveries to help cover the costs of the new benefits. Riders would pay flat fees, between $0.30 and $2 per ride. In January, Lyft, too, said it would be tacking on additional fees in response to Prop 22, and DoorDash is expected to make a similar commitment shortly. Workers and consumers are both getting squeezed as these companies juice their profit margins.

It is a near-certainty, now, that other industries and other states will follow suit. Wasting no time, political action committees are already spending big to bring similar Prop 22–style standards to Illinois and New York.

Labor and grassroots groups are trying to preempt this new system via the courts. On January 12, the Service Employees International Union and a group of ride-hailing drivers petitioned the state Supreme Court to invalidate Prop 22, on the grounds that it defies state legislators’ constitutional authority to implement a workers’ compensation system. They also argue that the proposition was worded in violation of a rule that limits ballot measures to a single subject to prevent voter confusion.

Legal recourse may be the best bet for workers and labor at this point, after 58 percent of voters supported the proposition in November, including a majority of gig workers themselves who were bamboozled into supporting the measure. Under California’s AB-5 law, those workers were viewed as full employees and entitled to full benefits, protections, and minimum wage before 22 was enacted. Given that the proposition requires a seven-eighths majority of the legislature to repeal, it’s functionally permanent. (This could also be subject to legal challenge, as some experts believe that you cannot put a supermajority requirement in a ballot measure without obtaining that supermajority in the vote.)

Prop 22 looks like a mortal threat for organized labor, one that will quickly proliferate nationwide if nothing is done to stop it.

Beating it at the ballot box with another proposition will be similarly impossible. Five companies threw over $200 million at Prop 22, making it the most expensive ballot measure in American history. After its passage, publicly traded Uber and Lyft saw their share prices explode, and DoorDash orchestrated one of the biggest blowout IPOs in recent memory. They’ve made their money back easily and are well funded to go another round should the need arise.

The best bet for getting gig workers (and imperiled full-time employees) out of this mess will likely be federal preemption. Joe Biden has committed to expanding union membership and even promised to “ensure workers in the ‘gig economy’ and beyond receive the legal benefits and protections they deserve.” That will fall to new labor secretary Marty Walsh, who will have to be pressed to take on Silicon Valley.

Of course, that will mean taking on much of Biden’s own administration, which is staffed heavily with former luminaries of Uber, Lyft, and others. In fact, the very intellectual framework for Prop 22 came from a paper co-authored by Seth Harris, a former Obama administration official and Biden adviser.

As it stands, Prop 22 looks like a mortal threat for organized labor, one that will quickly proliferate nationwide if nothing is done to stop it. That’s happening even faster than some alarmed labor advocates and grassroots organizers feared. Reversing that trend, and seeing gig workers unionized in accordance with Biden’s campaign-trail commitments, may well require massive, 1930s-style activism, along the lines of the Flint sit-down strike that led to the recognition of the United Auto Workers. Otherwise, Silicon Valley will simply be rewriting 21st-century American labor law on its own.

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