Gig Economy and Proposition 22: Flexibility for Whom?

Gig workers have been around for years. Today, we know them better as Uber, Lyft and Doordash drivers. These types of workers are not traditional, long-term employees with an established employee-employer relationship. Rather, they work for a company independently and are not considered employees. The principle behind gig work is that it provides flexibility and independence to employees, allowing them to determine their own schedules. With the rise of Covid, gig work is on the rise, especially with growing demand for services such as Instacart and Doordash. 

While this has been seen in the past as a lucrative business venture for both the companies/employers and employees, in recent years, the complexities of gig work have come to light. Now, in California, these issues are finally being addressed. 

Since the inception of these businesses that rely on their drivers, such as Lyft and Uber, the workers were not and are not considered employees; they are independent contractors. This means they do not receive employee benefits or insurance, are not protected by minimum wage and overtime regulations, are required to purchase their own gas, insurance, vehicle maintenance and Social Security taxes and are not allowed to join any sort of union. 

AB 5 is a 2019 state law passed by Gavin Newsom in order to “help reduce worker misclassification” and to protect employees from being exploited by companies and ensuring that they receive the requisite benefits. In order to be classified as a gig company, it requires that employees are free from the control and direction of the hiring entity, that their work that is outside the usual course of the hiring entity’s business, and that they are engaged in an independently established trade, occupation, or business of the same nature, none of which are met by Lyft and Uber. The employees are not free from the control of the company; their performance is monitored by the company, and their compensation is set by the company as well. In addition, the drivers directly work towards the companies’ main business of transportation. 

California is currently cracking down on gig companies, specifically those that are app-based. In May, the state sued Uber and Lyft for failing to meet the regulations set by AB 5 surrounding the classification of workers. Earlier this year, California sued the delivery service Doordash, requiring them to classify their workers as employees and not as independent contractors. Similarly, New York City has also tightened regulations for the companies, capping the number of Uber and Lyft vehicles allowed to operate in 2019.  

As a counter to the bill and the lawsuit, Uber and Lyft, have partnered with other gig and app-based services such as Doordash, Instacart and Postmates and devised Proposition 22.  

The proposition aims to provide a hybrid workplace model, combining aspects of independent contractors and full-employment. Firstly, it would guarantee the ability to form flexible schedules that can work around caregiving, school or other work, a prospect that has drawn in many drivers in the past. In addition, it would ensure that workers would receive 120% of the minimum wage in California (which would be roughly $15.60 in 2021) and provides a stipend for health coverage for workers who work more than 15 hours a week.  

While this seems like a fair proposal in theory, in practice, it has the potential to harm some employees. According to UC Berkley’s Labor Center, it was calculated that this new proposition would only guarantee $5.64 an hour, a drastic decrease from the $15.60 they claim to pay. Under this plan, drivers will only be compensated for “engaged time,” or time spent picking up and dropping off customers, even though over one-third of their work time is spent waiting for assignments. This drops the beginning wage of $15.60 to $10.45. In addition, drivers will not be reimbursed for the costs of driving during this waiting period, which includes gas and general wear-and-tear; this makes the new wage about $6.62. 

While the initiative does promise to reimburse employees for the engaged time at 30 cents a mile, the cost of maintaining and operating a vehicle is actually about 58 cents a mile. This then makes the wage $5.55. Finally, as independent contractors, they would be required to pay payroll taxes without receiving employee benefits such as paid rest breaks, meal breaks, sick leave and unemployment insurance. This brings the payment to $4.42. There is a health care stipend which, depending on how many hours drivers work, will work to compensate for everything else. This compensation averages to $1.22 for a driver working over 30 hours a week, making the grand total $5.64 an hour. 

Uber and Lyft have contributed $184.3 million in campaigning for Proposition 22, with $2 million being donated to the Republican party. The GOP has generally been more critical of AB 5, while prominent democrats such as Senator Kamala Harris have advocated for the right of workers to unionize and receive proper compensation as well as benefits. 

However, this issue is more nuanced than it seems. While the case against Proposition 22 is being fought by labor unions that represent the rights of workers, some drivers working for Uber and Lyft are not proponents of the new bill. Between 70-80 percent of drivers work less than 20 hours a week, so they profit from being independently contracted; these drivers benefit from the flexibility this type of work provides. 

They believe that there are plenty of other jobs one can obtain that will allow them to be considered full employees. However, the other 20-30% who work full-time make up more than half of all the hours worked at the company. Basically, they are working as full-time employees without receiving any of the benefits. A study conducted by a visiting professor at MIT found that gig work is beneficial for many in “countering unemployment and debt.” Critics of AB 5 argue that the law is harmful to freelancers and gig workers. However, for young people, especially, the gig economy contributes to poverty and homelessness. 

Furthermore, even Californians remain divided on the issue. A poll by the UC Berkeley Institute of Governmental Studies found that 39% of voters supported Proposition 22, with 36% against and 25% undecided. 

There is no doubt that Uber and Lyft provide an essential service; however, that service should not come at the expense of the rights of workers. Of course, the gig model is enormously beneficial for some employees while hurting others. Some have questioned the effectiveness of the rideshare model itself. Uber and Lyft initially came in as disruptors to the taxi service model and have been enormously successful for that very reason. However, some have pointed to the fact that the companies keep losing money, with Uber especially being in the “danger zone,” calling into question the efficacy of the rideshare business model itself. The coronavirus has impacted ride-sharing, although it has caused a bump in delivery services such as UberEats. The concern for some people is if Proposition 22 does not gain the requisite support, it will harm an already precarious business. 

Of course, the debate surrounding workers’ rights is especially prevalent during the time of the COVID pandemic. Hundreds of employees were laid off and left without pay since the sharp decrease in demand for drivers exacerbated the already failing economies of the companies. Since they are gig workers, they also do not receive any unemployment benefits.

The indecision surrounding the proposition reflects the challenge of balancing the rights of workers with the interests of corporations that create jobs but have dubious business models. Ultimately, the attempts to regulate a relatively new industry in the throes of a pandemic is a challenging feat. 

What is clear is that gig work can be enormously beneficial or harmful, dependent on the specific situation of the workers in question. If flexibility is the basis of gig work, then it is important and must be maintained. If anything, this dilemma shows the complexity of regulating gig work in a rapidly shifting economy. 

Nicole Moore, an organizer with Rideshare Drivers United, said, “Flexibility is equal to them not having to pay up,” she says. “The flexibility they’re talking about right now is the flexibility to do whatever they want.”

As the debate surrounding this issue continues, let us not forget that flexibility and the rights of workers are compatible. And, if we are talking about flexibility, we must ask, flexibility for whom?