Uber, Lyft and DoorDash have taken the first big step in their $90 million campaign to fight legislation that could make it more difficult for the companies to classify their drivers as contract workers.
The gig economy companies announced Tuesday a California ballot measure that would exempt them from the state legislation, but offer drivers some benefits. Californians are likely to vote on the measure in the November 2020 election.
The expensive political campaign is the latest development in a high-stakes battle that could upend the business model underpinning the on-demand economy. Companies like Uber built up massive fleets of drivers and delivery workers who are treated as independent contractors rather than employees. As a result, these businesses have largely not been obligated to provide minimum wage, overtime pay, workers’ compensation, unemployment insurance and paid sick leave.
Last month, California’s governor signed into law a bill known as AB-5 that would require a business like Uber to prove its contract workers are free from company control, perform work that is outside the usual course of business for the company and have independently established businesses providing similar work, in order to be classified as such.
The ballot measure, called the Protect App-Based Drivers & Services Act, includes a guarantee that drivers would make 20% more than the minimum wage, and 30 cents per mile for expenses such as gas and vehicle wear and tear. But critics say the promise of earning more than minimum wage doesn’t hold up as it doesn’t cover the time drivers spend between trips.
“Their wage floor suggests if If I’m a cashier, I’m only paid while there’s a customer in my line, not when I’m waiting for the next customer,” said California assemblywoman Lorena Gonzalez, who introduced the state legislation. Gonzalez also noted that the mileage reimbursement is about half of the IRS rate of 58 cents per mile for business miles.
The act also includes a health care stipend once a driver works 15 hours per week. Drivers working 25 hours per week or more will receive a stipend covering roughly half of their medial expenses.
Companies such as Uber (UBER) and Lyft (LYFT) say the California legislation threatens their drivers’ ability to work flexible hours. Drivers spoke at the announcement Tuesday, describing how they had more time to spend with their families when they made their own schedules.
Even as they mostly avoided having to provide benefits to drivers, Uber and Lyft burned through tremendous amounts of money. Now they are both under pressure to become profitable. Their stock prices are significantly below their IPO prices amid concerns about record losses. Uber, in particular, has gone through several rounds of layoffs.
Some community groups and public safety organizations have rallied behind the ballot initiative, including Fathers Against Drunk Driving and the CalAsian Chamber of Commerce.
But critics of the companies were quick to speak up Tuesday.
“This measure is another brazen attempt by some of the richest corporations in California to avoid playing by the same rule as all other law-abiding companies,” the California Labor Federation said in a statement. “California unions will join drivers who want fair wages, better treatment and flexibility to defeat this corporate ploy.”
Sara Ashley O’Brien contributed to this report