Uber, Lyft Take Worker Fight to Ballot Box After Court Win

(Bloomberg) -- Uber Technologies Inc. and Lyft Inc. were spared in a California appeals court Thursday from being forced to comply with a state law that, they say, would upend their business models. But the relief will be temporary.

The companies plan on using the ballot box to supplant a piece of legislation, already on the books, that requires Uber and Lyft to classify their drivers as employees, rather than independent contractors. Now, the companies have proposed a new law, to be decided in 11 weeks, that would grant additional protections to workers, but would not make them regular employees.

Both Uber and Lyft said they would suspend operations in California if they were forced to comply with the existing California labor law by Thursday at midnight, a court-imposed deadline. But on Thursday, hours before the companies were set to pull out of the state, an appeals court judge granted them additional time. The judge instructed the companies to prepare detailed plans for converting drivers into employees and set Oct. 13 as the date to hear arguments. But regardless of what the judge decides, voters will be the ultimate arbiters.

In the November election, the issue will be put before Californians, who will decide the fate of the companies’ ballot measure, Proposition 22. Uber and Lyft have already invested heavily to promote the proposal, describing it as a superior “third way” for classifying drivers’ employment, offering workers new benefits and protections. Prop 22 opponents say the measure falls short because workers are still denied employee status and rights guaranteed by state law.

The stakes are high. Rides-hailing companies have argued that converting drivers to employees would devastate their business in the country’s most populous state, with one Uber study showing that prices could increase between 30% and 120% depending on the region. And while California represents less than 10% of Uber’s ride-hailing volume, and less than 20% of Lyft’s rides, state legislators around the country will watch the outcome of the legal battle closely. If the state’s lawmakers prevail, other legislatures could follow suit with similar requirements.

As campaigning for the November election intensifies, the ballot proposal has become a hotly contested political issue. On Thursday, President Donald Trump’s campaign put out a statement in support of the companies. The campaign decried Democratic support for California’s labor law and said the state was “waging an all-out assault on workers.”

Supporters of the companies’ proposition have raised more than $110 million as of June 30, according to state filings. Meanwhile, the campaign to defeat Prop 22 has raised less than $1 million.

In a statement, a spokesperson for Lyft emphasized that the company had a long way to go to secure the right to continue operating as usual in California. “While we won’t have to suspend operations tonight, we do need to continue fighting for independence plus benefits for drivers,” the spokesperson said. Uber also celebrated the decision to grant an extension on enforcing the new law, saying the company was glad that “access to these critical services won’t be cut off while we continue to advocate for drivers’ ability to work with the freedom they want.”

Labor advocates have long opposed Uber and Lyft’s current way of doing business, arguing it creates a permanent underclass of workers denied traditional employment benefits like sick leave. “Wealthy executives at Uber and Lyft have had years to reshape their companies to comply with the law,” said Cherri Murphy, a driver and activist from Oakland, California. “Instead, they have chosen to break the existing law and spend millions to purchase a deceptive law that weakens labor and benefit protections.”

Veena Dubal, a professor at the University of California Hastings College of the Law, took issue with the companies’ argument that drivers could only work flexible hours if they were contract workers. “There’s nothing about employment status that says they are supposed to work certain hours,” she said. “It’s a false narrative.”

Nearly 100,000 drivers support the ballot initiative, according to Yes on 22 - Save App-Based Jobs & Services, a coalition of drivers and other organizations. The group -- which is financed by Uber, Lyft and DoorDash Inc. -- argues that Proposition 22 provides key benefits while preserving drivers’ freedom, including guaranteeing earnings that are above minimum wage, funding health benefits for drivers working 15 hours a week or more, and providing accident insurance to cover injuries and illnesses on the job.

Some drivers, though, say it’s not enough. “We want basic rights,” said John Mejia, a longtime Uber and Lyft driver who stopped working March because of health concerns related to the pandemic. Mejia said he’s anxious that the proposition’s proponents are so well-funded compared to labor groups. “We are the small dog in this fight,” Mejia said.

In an Aug. 9 poll conducted by Redfield & Wilton Strategies, 41% of respondents said they will vote ‘yes’ on Proposition 22, while 26% said they will vote ‘no’ and 34% remain undecided.

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