Uber, Lyft win in California, can classify drivers as contractors

OAKLAND, Calif. — A group of technology-empowered rebels, including Uber, Lyft and Doordash, have dodged a potentially devastating blow to their industry by carving out an exemption for themselves from a California law that required them to classify their drivers as employees instead of contractors.

California voters passed Proposition 22, winning 58% of more than 11 million voters and delivering a stinging rebuke to state lawmakers and labor leaders who were fighting for better working conditions for a growing number of people who drive for ride-hailing and food delivery services in the nation’s most populous state.

California has one of the strictest laws in the country for determining when a company must treat its workers as employees with benefits such as minimum wage, overtime and sick days. Uber, Lyft, Doordash, Instacart and others sought to get out of those requirements, and after failing in court, succeeded in convincing voters to give them an exemption from most of the year-old law’s provisions.

A record $200 million spending spree by the companies and their supporters helped them win the vote. The investment yielded a huge return for Uber and Lyft, whose combined market value climbed by $8 billion on Wednesday.

Supporters applauded the outcome, saying drivers would be able to maintain their independence while accessing new benefits such as a guaranteed minimum wage and health care subsidies.

Don Pruitt, an accountant in Stockton, was relieved by Proposition 22’s passage because it will allow him to continue to drive for both Lyft and Uber, as well as handle deliveries for Postmates and Instacart, as he has been during the past three years whenever he isn’t busy filing taxes for his clients.

“If Prop. 22 had lost, I wouldn’t have been able to keep doing that to make extra money. I couldn’t work for all of them if I had to be an employee,” Pruitt said.

Others viewed the development as a major setback for gig workers.

“It should be a good wake-up call for us all, across the country, if these companies think they can buy their way out of having to comply with basic labor laws,” said Shannon Liss-Riordan, a labor attorney who has been fighting for employment protections for app-based workers. “I’m worried about what these companies may try to pull off on a national basis.”

Edan Alva, a former Lyft driver, stopped driving during the pandemic because he was shelling out for disinfectant, risking his health and barely making money. He was hoping the proposition would fail, leading to better working conditions so he could consider driving again.

“Labor rights are human rights, and the fact that Lyft and Uber managed to basically trump human rights doesn’t mean everyone should give in,” he said.

Investors were thrilled with the outcome, largely because it allows the companies to preserve the status quo and puts them in a better position to reverse their long history of losses after the pandemic is over.

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