What happened in California? Despite the state’s liberal reputation, voters there last week approved Proposition 22, a ballot initiative exempting many gig companies from state workplace laws and stripping their workers of basic, essential protections.
Uber, Instacart, Lyft, DoorDash and other on-demand providers of ride-shares and food and grocery deliveries spent $200 million pushing the proposal, an astounding sum that workers and their allies couldn’t remotely hope to match. Not surprisingly, Californians were misled by an avalanche of claims about the proposal’s impact on workers. The measure, which takes effect next month, was approved with 58 percent of the vote.
Emboldened by the results in California, Uber and friends are apparently planning to take the show on the road. Potential targets could include Massachusetts or New Jersey, where state regulators have pursued them, or New York or Pennsylvania, where courts have rejected the argument by gig companies that workers run their own independent businesses. The rest of us need to understand what happened in California.
What was at stake with Proposition 22 was whether workers for app-based driver and delivery companies would be considered employees under California statutes, which like workplace laws nationwide, cover only employees, or whether they should be classified as independent contractors. Proponents argued that requiring gig companies to follow current laws would badly damage their on-demand business model and result in longer wait times, higher prices and the loss of countless jobs. These were the same bleak prognostications gig companies made about the minimum wage for drivers that New York City enacted two years ago — predictions that did not come to pass.
What they didn’t say was that it was a terrible deal for workers. Allowing companies to write their own exemption from California law is also a cautionary tale for our fragile democracy.
Now, workers for these gig companies in California will not have a right, as employees do under state law, to paid sick days, overtime pay, unemployment insurance or a workplace covered by occupational safety and health laws.
How did these companies convince California voters to approve this snatching of rights from thousands of vulnerable people? They used a deluge of money to convince voters that the proposal served workers’ interests by preserving their flexibility, ensuring a guaranteed level of pay and providing them with “portable” benefits.
Their claims were deceptive.
There’s no law prohibiting flexible or part-time hours for employees. Millions of employees already work part-time or flexible hours. Indeed, these particular industries (ride-share and food delivery) would be unlikely to hire only full-time employees because of the ebb and flow of customer demand.
Under Proposition 22, gig companies will have to pay their contractors 120 percent of the state or local minimum wage. In addition, companies must pay 30 cents per mile for gas and other vehicle-related expenses, adjusted annually for inflation.
But here’s the catch: Workers will be paid only for “engaged time,” defined as the time between receiving a request and dropping off the passenger. This is far less than what’s required under laws for employees, who must be compensated for all work time. About a third of drivers’ work time wouldn’t fall within this definition of “engaged time,” according to a study funded by the companies themselves. Workers will not be paid for time spent getting gas, waiting for a ride request or cleaning and sanitizing their cars.
Plus, 30 cents per mile doesn’t cover all vehicle-related expenses; by comparison, the Internal Revenue Service’s optional standard deductible rate for the costs of operating a car for business is 57.5 cents per mile. And as independent contractors, drivers won’t have a right to overtime pay for long workweeks, as is required for employees. In light of all this, a study by three research groups at the University of California at Berkeley found that Uber and Lyft drivers would be guaranteed only an estimated $5.64 per hour. This no doubt would have surprised 40 percent of those in a survey of early voters who said they had supported Proposition 22 to ensure workers earned livable wages.
Finally there is the issue of benefits. Gig companies have used snazzy “portable” benefits language, but Proposition 22 gives workers crumbs compared to what it takes away. Companies must provide a “health care subsidy” to people working at least 15 hours of “engaged time.” At 30 weekly hours, the subsidy would average about $1.22 per hour, or just over $36.00 a week, according to one analysis, a paltry sum compared with what workers would receive as employees who are paid for all of their work time — not just two-thirds of it.
And of course, rights are meaningful only if they are enforceable. If a company pays less than what’s required, shaves hours or doesn’t pay the health care subsidy, Proposition 22 is silent about what mechanism workers can use to enforce those pay and subsidy rights.
The kicker? Unlike most laws, which require only a majority vote of the State Legislature to revise, Proposition 22 requires the vote of seven-eighths of the Legislature to make any changes.
These are the truths that can be buried by well-funded advertising campaigns of large corporations collaborating to write their own rules. And this, in the end, is what’s most dangerous about Proposition 22. Companies shouldn’t be able to do this. Surely lots of other industries would like to avoid paying unemployment insurance taxes, sick days or overtime. Surely food manufacturers would like an exemption from safety requirements and inspections, and chemical companies would save a bundle if they got an exemption from environmental laws.
But that’s not how our system is supposed to work.
California has always been a bellwether. This time, let’s not follow its lead.
Terri Gerstein is the director of the State and Local Enforcement Project at Harvard Law School’s Labor and Worklife Program and a senior fellow at the Economic Policy Institute.
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