Proposition 22: Deception and Desperation - Part Three

This is the third and final progressive assault on Proposition 22. We have already seen how companies such as Uber and Lyft push as many operating costs - and burdens - as possible onto their drivers by claiming that they are independent contractors instead of employees.

With the election only days away Uber, Lyft, Postmates and Doordash have now ponied up more than $185 million dollars. This is a huge amount of money for these kinds of no profit companies (read down below) to overturn California Assembly Bill AB 5. Let’s see how and why.

-Uber, and others, are abusing their drivers by misclassifying them as independent contractors.

Uber, and all other app-based companies, created Proposition 22 in response to the California Assembly Bill AB 5. This is a state statute that expands on a landmark Supreme Court Case of California called Dynamex Operations West Inc. vs Superior Court. In that case the court held that most workers are employees, ought to be classified as such, with the burden of proof for classifying workers as independent contractors belongs with the hiring company. As a result, AB 5 was written to provide workers who are classified as employees greater labor protections, including minimum wages laws, sick leave, unemployment and workers’ compensation insurance, which independent contractors do not enjoy.

One of the best things about the AB 5 bill is that it sought to clarify who is an employee and who is an IC based on a three-pronged assessment. According to the bill, you are an independent contractor if:

a) the individual is free from direction and control applicable under the contract both for the performance of service and in fact,

b) that the service is performed outside the usual course of business of the employer, and

c) that the individual is customarily engaged in an independently established trade, occupation, business or profession of the same nature as that involved in the service performed.

Here’s an example: Your business is leasing aircraft. You hire the Elite Payroll Service Company to do all of your payroll work (deductions, withholding, payment of taxes, etc.) as an independent contractor. They have specialized in this business for years and have a lot of other payroll service customers who hire them as independent contractors. You simply give them the data they ask for, and tell them, “We don’t know a damn thing about payroll. Just do what needs to be done for payroll stuff and get back to us at the end of the month.” Your leasing company neither tells Elite Payroll how to do its job nor does it direct them in any way. Your company’s business is leasing aircraft and not figuring payroll. Elite Payroll normally and customarily does this as a professional service and the service of figuring payroll is the only service they will provide. Whether Elite Payroll is a company or an individual - this is an independent contractor relationship.

The test set by Bill AB 5 is pretty clear. And it is pretty clear that with the control that Uber and Lyft have over their drivers they are really, in fact, employees.

But Uber and Lyft have a fig leaf of justification to prove that their drivers are independent contractors. They claim that they are technology companies, and that the transportation is farmed out to be provided separately, by the individual drivers, who act as independent contractors.

This argument is central to defending Uber and Lyft against the second, and most threatening, part of the assessment test: that the drivers are doing a work that is separate from the main business of to Uber and Lyft.

This fiction, that Uber and Lyft have a business that is separate from the transportation service provided by their drivers, has been soundly struck down.

Benjamin Sachs, a professor of labor law at Harvard, has no doubt that Uber, for one, is certainly in the transportation business, “It seems very clear that Uber is in the transportation company, not a technology company.”

And not only are Uber and Lyft transportation companies but they exert the kind of control that clearly makes their drivers employees, not independent contractors.

William Gould a professor emeritus at Stanford Law School and a former chairman of the National Labor Relations Board lays out some of the reasoning behind the legal opinion that Uber is acting as an employer in a transportation business, “Uber is unmistakably acting as an employer under the rules of the new California test… Uber is deciding who is suitable to do this work for it, what their wages are to be, what the fare is, and the percentage of the fare the worker will get. The emperor has no clothes.”

Uber and Lyft are in the transportation business and they control the people who do the driving. This makes them EMPLOYERS! Remember this when you see their media ads in which they talk about how they are paying their drivers more and letting them have some freedom over their driving. These are crumbs: if they really wanted to treat their driver fairly they would make them employees and pay them the benefits (FICA contributions, insurance, sick pay, supplies) they deserve.

-Uber and Lyft need to screw their driver in order to survive.

Uber started business as UberCab in 2009, Lyft originally started in 2007. In that time neither of them have ever, ever, ever made a profit operating as a ride-sharing company. And they continue to lose money. For 2019 Uber lost an astounding $8.5 billion dollars. Lyft was close behind with a loss of 2.6 billion dollars.

The reason that Uber and Lyft (and other app-based companies, I am sure) do not operate profitably is simple: they destroy conventional paid transportation (cabs, pick up vans, etc.) by undercutting them on price. And they can do this because they work their drivers like employees but push cost off onto them as independent contractors.

As of now Uber and Lyft are the only publicly traded companies that do app-based driving. And this is a real problem. Companies whose share are publicly traded have to reckon with shareholders - and particularly shareholders who are upset that the stock they bought has not performed well.

Uber went public on May 9,2019. On the first day of trading the stock sold for $45/sh and took in $8.1 billion dollars. Lyft actually went public first on March 28, 2019 at $72/sh. In the approximately year and a half since coming public Uber has seen its share price rise above the offering price only briefly. Lyft saw its share rise up to $87/sh and then start dropping.

Both Uber and Lyft have slid almost continuously since launch, and both are below their offering prices. In short, if you bought the shares of either company when they went public (as a lot of investors did) you have done virtually nothing but lose money.

It is easy to see why Uber and Lyft (and all of the app-based driver companies) are desperate to fight Bill AB 5. They are not making money, have never made money, their share prices have been a disappointment, and now they may actually have to take care of drivers that they have been exploiting for years. No wonder they are desperate!

-Uber and Lyft take more money from their drivers than they claim and will probably take even more.

Uber claims that it takes 25% of the rider fare for their own, and Lyft claims that they take 20% of the same. But when examined carefully, with information submitted by real drivers doing real driving, is that they take more: Uber actually takes about 29.6% and 34.5%.

Both Uber and Lyft have promised investors that they will turn profitable sometime in 2020. Given their miserable performance to date, there are only two ways this can be done: charge the riders more or take more from the drivers. If drivers remain “independent contractors” which do you think will happen.

-Uber and Lyft (and DoorDash) want the privilege of a special exemption that will help only them and hurt all laborers.

Uber and Lyft are asking that they (and other app-based transportation companies) and only they be exempted from the new California law that requires workers to classified as employees/independent contractors according to an assessment that has been established by our own state Supreme Court. Nobody else, just them.

If we allow this exemption it open the door to other companies to try and run a ballot initiative to get the same exemption. This could means that literally millions of people who are employees would then be classified as independent contractors - and deprived of pay and benefits they deserve.

Here is another thing Uber and Lyft don’t tell you: this Proposition 22 is a viciously anti-labor idea. Employees in a company can form a union and negotiate for better pay and conditions - independent contractors can’t. Moreover, if an employee is misclassified then the state will protect him legally as they uphold state law. So it would be Uber against the state of California. If you are an IC, then you will be forced to settle by arbitration (a typical industry trick). Between a big company and an individual working as an independent contractor, guess who has the upper hand in arbitration?

-Do not believe the claims that Uber, Lyft and DoorDash make in their campaign advertising - it’s phony.

Virtually all of the campaign advertising for Proposition 22 is done by just three companies: Uber, Lyft and DoorDash. And one thing that they push relentlessly is that if Proposition 22 does not pass, then drivers will lose their most cherished advantage in the entire world: flexibility.

In any of the relentless campaign fliers from Prop. 22 supporters did you ever get an explanation as to why this is so? Why does being an employee instead of an IC means that you absolutely can not have a flexible schedule? This is only a negotiation between the company and driver. Just work it out!

And the best one of all: Uber and Lyft both claim that they will leave California if they are not granted the special exemption (available to no other industry) in Proposition 22.

Oh year? Leave the biggest, richest, most tech savvy state and go - where? Mississippi? Rural Nebraska? Where?

Progressives believe in helping and protecting ordinary working people. The company execs at Uber, Lyft and DoorDash think that they alone should be privileged to mistreat workers by making them independent contractors instead of employees. But no matter how many crumbs of “extra” wages and phony benefits you see in their advertising, Proposition 22 is a scam. Their drivers are employees and real help comes from them being treated that way.

Vote no on Proposition 22.