DoorDash Scores Victory With Prop 22 Ahead of Planned IPO

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DoorDash Inc. scored a big victory in California on Election Day, when voters approved a measure that would allow the food delivery company to keep its workers classified as independent contractors.

The San Francisco-based startup, along with Uber Technologies Inc. and Lyft Inc., was the biggest funder of a record-setting $200 million campaign to pass Proposition 22. The win exempts the so-called gig economy businesses from a state labor law that would require them to hire the workers as employees and pay for certain benefits.

DoorDash Chief Executive Officer Tony Xu highlighted the fact that many delivery workers supported the measure. “This victory belongs to the tens of thousands of Dashers and small businesses who advocated so forcefully for this campaign, as well as the customers and the communities we serve,” he said in a blog post early Wednesday.

The passage of Proposition 22 could hardly have come at a better time for DoorDash. The company is embroiled in a lawsuit with its hometown district attorney over the issue—a critical court hearing is set for Thursday— and is also planning an initial public offering, possibly by the end of the year.

Had voters not approved the ballot measure, DoorDash probably would soon find itself facing a court order to reconfigure its labor model—similar to the rulings California Attorney General Xavier Becerra won against Uber and Lyft in August.

The ballot measure was specifically designed to immunize the companies from being forced to comply with last year's labor-law overhaul in the state, California’s Assembly Bill 5.

Still, DoorDash isn't out of danger. The San Francisco suit seeks damages and penalties from the company for the “illegal misclassification of its Dashers” for failing to pay minimum wage, overtime and business expenses and not providing meal and rest breaks, health care benefits, parental leave and unemployment insurance. 

Because Proposition 22 isn't retroactive, the district attorney could still seek back pay for all those alleged violations.

As of Wednesday morning, there was no indication on the court docket of how the election outcome will affect court proceedings.

DoorDash, which private investors valued at around $16 billion in June, is eyeing an IPO as early as November or December, according to a Bloomberg report. Publicly traded Uber and Lyft, which also faced massive financial consequences if Proposition 22 did not pass, saw their shares soar after the vote. 

©2020 Bloomberg L.P.

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