The onset of a global pandemic and the contentious presidential election in the United States made 2020 feel like a decade long. Over the last year, many of us relied on apps like Uber Eats and grocery-delivery services such as Instacart to avoid leaving the house or as extra sources of income. App-based service corporations maximise profits by paying workers as independent contractors rather than regular employees, resulting in the following U.S. American policy battle you might have missed.
AB-5: The Gig Bill
Passed by the California state government in 2019, Assembly Bill 5 (AB-5) amended the California labour code to include an ‘ABC’ test to differentiate independent contractors from regular employees. Under the new criteria, an individual Uber driver or DoorDasher does not provide a completely separate service from the company. The independent contractors are essential to the core functioning of the business and must therefore be classified as employees. Under the bill, gig workers would be entitled to fair wages, paid sick leave, accident compensation, and other state benefits and labour protections enjoyed by permanently employed workers. AB-5 threatens the bottom line of corporations like Uber, which save an estimated 30% on payroll expenses by underpaying gig workers.
AB-5 elicited a dramatic reaction from Uber and Lyft, which both threatened to suspend operations pending lawsuits and the outcomes of the November 2020 elections. California is one of 26 states where anyone can propose a new law or amendment to the state ballot to be voted on by the general population, so Uber and other companies introduced Proposition 22, which would create exceptions to the gig law for app-based transportation and delivery services. Instead of minimum wage guarantees, Proposition 22 suggests that app-based transportation and delivery services pay freelance workers a 120% markup of the local minimum wage per hour of service. At face-value this seems advantageous, but researchers at UC Berkeley found that after accounting for wait time, vehicle expenses and healthcare, a worker would pocket $5.64 dollars an hour instead of the $15.60 estimated by Uber and Lyft. For context, the federal minimum wage in the U.S. is $7.25 an hour.
These companies formed a coalition and funded the campaign Yes on 22: Save App-Based Jobs & Services, which tried to frame Prop 22 as a measure that would protect jobs in contrast to the gig law. Uber, DoorDash, Lyft, and Instacart spent nearly $185 million on promoting Proposition 22 through this campaign, making it the most expensive ballot measure in the state’s history. Part of the campaign costs subsidised push-notifications to Uber drivers themselves, possibly violating state labour codes and crossing the ethical boundaries of political campaigning in the workplace. Admittedly, the coalition’s campaign gave a compelling account of the merits of gig labour, even pointing out the accessibility of services for differently abled people. And to their credit, Uber and DoorDash cannot be solely blamed for the fact that so many Californians need multiple jobs to handle rising costs of living.
But as proponents of No on Prop 22 argued, app-based service companies exacerbate existing inequalities by denying fair compensation to their workers, 78% of whom are people of color. Californian voters struggled to weigh threats of job loss against the promise from Uber and other companies to improve their work environment if given exceptions to the gig bill. Exorbitant campaign expenditures combined with aggressive tactics were difficult to counter: in a devastating loss for the labour movement, Proposition 22 passed as an amendment to AB-5 by a 58% vote in November 2020.
Prop 22 prevented gig workers from receiving rights and protections of the regular employee classification under the original text of AB-5. As predicted by labour unions and other advocates, the impacts of Prop 22 proliferated beyond the one million Californians relying on gig labour as a primary or secondary source of income. Popular grocery store chains such as Safeway and Vons planned to fire hundreds of their unionised delivery drivers across the nation in favour of DoorDashers that can be paid far less and replaced more easily. It is a stark contrast to the early days of the pandemic, when these same grocers tried to classify their delivery drivers as “first responders.”
California does not exist in a vacuum; time and time again tech executives treat the state like a policy playground. In celebrating the win on Proposition 22, Uber’s CEO reportedly stated, “You will see us more loudly advocate for new laws like Prop 22.” The struggle over independent contractor status is not contained to the United States: Deliveroo’s exit from Germany in 2019 preempted this policy battle, whereas French and Spanish courts have already ruled in favour of gig workers. As early as 2016, the United Kingdom’s Supreme Court ruled that app-based drivers must be paid and protected as regular employees, not independent contractors. After Uber appealed the decision for five years, on February 19 the UK’s Supreme Court rejected the final appeal in a landmark decision on gig workers’ rights. However, country-by-country cases still lack a cohesive policy framework, especially at the EU level. Uber is actively lobbying the European Commission to implement reforms in the style of Prop 22 this year.
By weaponising employment labels and classifications, app-based service corporations cut costs and erode labour rights and protections. The gig workers helping us through this pandemic deserve healthcare, paid sick leave, and fair compensation.