Gig work’s in California court (again)
Gig work’s in California court (again)
Are delivery workers contractors or employees? The forever fight continues.
It’s a big week for California’s Proposition 22. California state Supreme Court justices heard oral arguments on Tuesday over the constitutionality of the 2020 ballot initiative that enshrined app-based rideshare drivers and couriers as independent contractors. Prop 22 essentially overruled an earlier state law that required large tech companies like Uber to classify contractors as employees. Companies including DoorDash and Uber spent a combined hundreds of millions of dollars to help pass the initiative in their favor, including a provision that makes it very hard to change.
By the end of the day, reports said the Court seemed poised to uphold the proposition.
The challenge — this time — to the contentious proposition comes from a lawsuit filed by some drivers and the Service Employees International Union. It attacks a particular part of Prop 22 relating to workers’ compensation, the program that protects employees who are injured or permanently disabled while working. A judge in Alameda County (that’s Oakland and Berkeley) delivered a surprise in 2021 when they agreed and declared parts of Proposition 22 unconstitutional, invalidating the entire proposition. (Later a court invalidated that decision, but none of this changed how Prop 22 is enforced as it makes its way through the courts.)
If it feels like we’ve been here before, it’s because we have, sort of. Might this California Supreme Court decision be the final word on a contentious law? Probably! A legal expert quoted in the San Francisco Chronicle predicted that the California Supreme Court would overturn only a small part of Prop 22 — the requirement that a seven-eights legislative majority is needed to change the measure and allow drivers to join labor unions — but leave the rest of it intact. As of Wednesday morning, the Court seems to agree.
What happens in California could set a precedent for what happens in the rest of the country.
For years, delivery companies have relied on courts to protect their business models, from challenging proposed caps on commissions that gained popularity during Covid lockdowns to fighting minimum wage requirements levied by certain jurisdictions. And when the law doesn’t go their way, they loudly explain why regulators just don’t get it.
In new data shared late last week, DoorDash said that its couriers in California “are seeing higher earnings, guaranteed flexibility and access to unprecedented benefits” thanks to Proposition 22. Statewide, the company says its couriers earned around $38 per hour while on deliveries in 2023, a 41 percent increase from 2020 earnings. (Emphasis mine, because so-called “active time” seems to be a central part of the opposition’s argument.)
Per coverage in Reuters:
A study released on Monday by researchers at the University of California, Berkeley, found that most gig drivers in five major U.S. cities — including Los Angeles and San Francisco earn significantly less than the minimum wage when full costs are taken into account, including downtime.
(Emphasis also mine.)
The big companies appear confident — and deep-pocketed— in their efforts to influence the way that government regulators view the future of gig work.
In January, Politico revealed Uber’s plans to drop $30 million into the Uber Innovation PAC, or political action committee, designed to back company-friendly candidates in state elections. “That will make it one of, if not the largest, single-funded state PACs this election cycle, injecting a decidedly pro-business bent into the mix,” Politico reported. (The headline: Uber money bombs Sacramento.)
During the company’s February earnings call, chief financial officer Prashanth Mahendra-Rajah referenced the PAC, but also Uber’s “really strong policy team that is working on reforms state by state.”
That’s because the Prop 22 scrutiny isn’t the only regulatory challenge facing big delivery. Notably, New York City implemented a continuous law raising minimum wage for delivery workers; companies responded by cutting the number of workers on the platform by 25 percent. Uber CEO Dara Khosrowshahi said earlier this month that 20,000 would-be couriers are stuck on a wait list.
Conversely, in a likely win for big delivery, Seattle is poised to roll back its delivery minimum wage just months after its implementation. A City Council committee voted to make the change earlier this month; a full vote is expected soon.
Wins like this help the leaders of gig-work companies project this aforementioned confidence in their models while introducing a level of disbelief that regulators might think differently.
“Most governments and lawmakers want to be productive participants in working with businesses to provide a service that deserves to exist in cities,” DoorDash CEO Tony Xu said during his company's most recent earnings call.
“Think about the billions of dollars, or tens of billions of dollars that you're adding to the local economic GDP — or the fact that you're offering a service that consumers love and a place where anyone can earn extra income on their own time. Who wouldn't want that?”
More to know about this forever fight:
California’s proposition system is meant to give the people a voice on important legislation, but it can also be used by big business to overturn unfavorable laws. I like this piece from Politico offering more info on the very specific forces that influence the system in the state, which is very important context during the latest Prop 22 squabble. — Politico
A recent Vox explainer, focusing on the rising price of delivery food, does a good job of highlighting the main characters’ motivations. I love the lede: “No one is happy about the delivery apps. Not the customers, who feel gouged by an avalanche of fees. Not restaurants, who feel gut-punched by the commission apps take from them. Certainly not delivery workers, who have long been rewarded with a pittance for doing a job that, in a city like New York, has a higher injury rate than that of construction workers.” — Vox
My own 2021 reporting about delivery companies’ reliance on courts, published in Robb Report in 2021, focused on pandemic-era commission caps. But its main idea still stands in the face of increased scrutiny. With gig work companies facing pressure from both local and federal lawmakers, they are making good on earlier promises to fight hard to protect their particular brand of work. — Robb Report
