Uber and Lyft anticipate them to get their approach in California to exempt them from state labor legislation
Dara Khosrowshahi, CEO of Uber Technologies Inc., speaks during an interview in Tokyo, Japan on Wednesday July 3, 2019.
Akio | Bloomberg | Getty Images
NBC News predicts that California voters decided Tuesday that Uber and Lyft should be exempted from state labor law, which aims to turn their drivers into employees, not contractors.
Voters called for California's Proposition 22, an electoral measure that essentially became one of Uber and Lyft's last hopes in the state to continue their activities under the status quo.
The proposal would allow drivers for app-based transportation and delivery companies to be classified as independent contractors in many circumstances. While this would disqualify them for benefits granted to employees, the measure also entitles drivers to new benefits such as minimum earnings and car insurance.
Several gig economy apps backed the move, including Uber, Lyft, DoorDash, Instacart and Postmates, which Uber is acquiring. Supporting these companies helped raise nearly $ 203 million to support the move, while opponents raised less than $ 20 million, according to Ballotpedia.
Democratic presidential candidate Joe Biden rejected the measure. Biden tweeted in May that Californians should vote no to the initiative, saying, "Gig economy giants are trying to break the law and free their workers. This is unacceptable."
While Uber and Lyft have been able to raise money from venture capitalists and score billion dollar valuations in the public market, neither has achieved profitability. For this reason, the contractor and driver model is particularly important for companies to avoid costly employment-related benefits such as unemployment insurance.
Companies have warned that they would likely have to pass increased costs of reclassifying workers on to consumers. In a blog post earlier this year, Uber estimated that parts of California would have to increase driver prices by 25% to 111% to cover the cost.
The New York Times reported in August that both companies are considering a fleet-like model that resembles traditional taxis. Under this model, companies would license their brands to operators such as a franchise company, according to the Times.
The proposal has a significant impact on DoorDash and Instacart, which are reportedly preparing to go public. Like Uber and Lyft, these companies rely heavily on gig workers for their delivery services. Without the passage of Prop 22, companies would likely have had to worry about the higher costs of hiring workers.
Critics such as Rep. Ro Khanna, D-Calif., Have said there is nothing in current labor law that prevents Uber and Lyft from providing flexibility for drivers and classifying them as employees. The companies countered that the logistics of such a model would be untenable, as it would be too difficult to track the hours worked.
Companies suffered a setback in August when a trial judge issued an injunction that forced them to classify their drivers as employees, even though that decision has not yet come into effect as the case finds its way through the judicial process. The fate of the lawsuit is unclear now that the electoral process is complete.
"In a historic election, California drivers sent a clear message that we want to be independent and that the best thing for us is a new approach that preserves our independence while offering new benefits," said Jimmy Strano, Bay Area rideshare driver. in a joint statement from Yes on 22, a committee funded by Uber, Lyft and DoorDash.
A Lyft spokesman postponed Yes on the 22nd. Representatives from Uber and the California Attorney General did not immediately respond to requests for comment.
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