Uber and Lyft reveal their alternative proposal to California's new gig-economy law

Uber and Lyft reveal their alternative proposal to California's new gig-economy law

Dozens of supporters of a measure to limit when companies can label workers as independent contractors circle the Capitol during a rally in Sacramento, Calif., Wednesday, Aug. 28, 2019. If approved by the legislature and signed by Gov. Gavin Newsom, AB5, by Assemblywoman Lorena Gonzalez, D-San Diego, would require companies like Uber and Lyft to treat their drivers like employees. (AP Photo/Rich Pedroncelli)

Associated Press


One month after California's governor signed a major law that could have devastating effects on many gig-economy companies, including ride-hailing platforms, Uber and Lyft are taking their fight against the new rules directly to voters.

At a press conference Tuesday in Sacramento, a number of gig-economy companies - including Uber and Lyft - unveiled new details of their $90 million fight to keep drivers classified as independent contractors and not full-fledged employees. The proposed ballot measure could eventually find its way to the November 2020 ballot, if enough signatures are gathered.

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Drivers organized by the newly formed "protect app-based drivers and services" group - which includes only transportation and delivery companies - said they oppose the new law because it could cause workers to lose much of their flexibility. A vast majority of drivers for Uber and Lyft work only part-time.

"Driving allows me to put my education first," Jermaine Brown, a driver and college student, said at the press conference. "Not only do drivers get to keep our flexible schedules, but we also get new benefits like healthcare and more earnings potential. I'm a stay at home dad. I do things with my kids during the day and drive in the evening. Being able to have that flexibility and being able to drive how I want to drive really helps me and my family."


Supporters of the law have said in the months since its passage that there's nothing in the law that explicitly requires companies to implement rigid schedules or shifts.

"This is yet another example of corporations and billionaires trying to exempt themselves from the democratic process by using wealth and fear tactics," Gig Workers Rising, which supported the bill, said in a press release.

"For years, these companies have refused to pay drivers fairly or treat us with respect. After working 80 hour weeks, sleeping in our cars and surviving on poverty wages, drivers organized and won support for AB5 from both the public and lawmakers. Now, instead of obeying the law, Uber, Lyft and DoorDash want to spend $90 million to avoid accountability - all while claiming it will "protect" drivers."

The ballot measure would guarantee minimum earnings of "at least 120% of the minimum wage," the group said, as well as $0.30 per mile for expenses such as gas and vehicle wear and tear. The measure also calls for a healthcare stipend, health and auto insurance, and protection from discrimination and harassment.

In order to make the 2020 ballot, the coalition will need to obtain roughly than 650,000 verified signatures on a petition for their proposal, organizers said. June 25 is the "do or die" deadline for submitting the proposal, adding that all of the companies remain open to "legislative discussions" with lawmakers.


A $290 million problem

As Assembly Bill 5 made its way through the state's legislature, Barclays analysts estimated that the immediate reclassification alone could cost $290 million for each company, essentially bankrupting them.

"Beyond higher wages, ride-hailing companies would be responsible for half (6.2%) of employees' Social Security and Medicare (1.45%) tax, as well as the costs for administering any employee benefits (e.g., health care and 401ks)," the bank's analysts said in a note to clients.

"With current driver earnings and incentives running at an estimated 78% and 76% of gross bookings for Uber and Lyft, respectively, a 25% increase in driver wage/benefit costs would essentially drive take rates to zero (absent rate increases to riders)."

"We think an adverse ruling on the contract workforce issue would potentially bankrupt both Uber and Lyft," they concluded.

Here are the proposals specifics, according to the group's press release:

  • Protect worker flexibility and independence. The ballot measure would protect the right of app-based rideshare and delivery drivers to work as independent contractors if certain criteria are met, such as having control over their own hours and when, where, how long they work, and the ability to work for multiple companies.
  • Require new minimum earning and benefit guarantees, including:
    • At least 120 percent of the minimum wage, while preserving the opportunity to earn more
    • $0.30 per mile for expenses such as gas and vehicle wear and tear
    • Earnings guarantee, including:
      • Healthcare subsidies consistent with employer contributions under the Affordable Care Act for drivers who work 15 hours a week or more
      • Occupational accident insurance to cover on-the-job injuries
      • Automobile accident and liability insurance
      • Protection against discrimination and sexual harassment
    • Implement new customer and public safety protections. The measure would provide for:
          • Recurring background checks of drivers
          • Mandatory safety training of drivers
          • Zero tolerance for alcohol and drug offenses
          • A cap on driver hours per day to prevent sleepy driving

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