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How Uber and Lyft’s business model could be changed on Election Day


Uber Technologies Inc. and Lyft Inc. have long defended their “gig worker” business practices in the face of local crackdowns, class-action lawsuits and the scrutiny of going public, but their home state of California could finally push them to make some concessions — or blow up their business model.

California has been trying to force Uber
UBER,
-1.26%
,
Lyft
LYFT,
+1.59%

and other gig-economy companies to follow state labor laws, which would classify most of their drivers as employees rather than independent contractors. In August, a judge ordered Uber and Lyft to immediately comply with the law, a decision the companies are appealing.

See: Uber and Lyft must make drivers employees because California law has ‘overwhelming’ edge, judge says

The gig companies have spent more than $185 million in an effort to exempt themselves from the law by way of Proposition 22, which California voters will consider Nov. 3. Uber, Lyft, DoorDash, Instacart and Postmates have greatly outspent the opposition, made up of labor unions, the state Democratic party and others, which has raised about $10 million.

Uber, Lyft, DoorDash and other gig companies have outlined in the measure additional wages and benefits for drivers and couriers, which gives other states a potential path to follow as worker protections grab the spotlight during a pandemic and economic crisis. If the proposition fails and Uber and Lyft reorganize their businesses to follow the law instead of leaving California, as they have threatened, it gives everyone a glimpse at what the companies could expect to deal with elsewhere.

“What happens here is terribly important to many states… which are considering such legislation,” said William Gould, professor emeritus at Stanford Law School and a former chairman of the National Labor Relations Board. He added that the impact could be nationwide because former Vice President Joe Biden has expressed opposition to Prop. 22; if he wins the presidency, his administration could “seriously consider” putting the same standard on worker classification that California has adopted “in the National Labor Relations Act itself,” Gould said. 

The key issues as the proposition goes before voters are wages, benefits, flexibility and insurance. Uber and Lyft have long touted the flexibility that gig work provides and say reclassification would end that; critics say the gig model pushes the onus for protections, such as health-care benefits, on the workers without paying them enough to allow them to afford to cover those costs, and that the measure would essentially lock in subpar wages and benefits and preclude workers from organizing.

See also: The different routes Uber and Lyft could take as they fight California law

Here’s a breakdown of how Prop. 22 addresses or fails to address the key issues.

Flexibility

This issue is at the heart of the gig companies’ argument that workers need to remain independent contractors. Prop. 22’s backers claim that drivers “overwhelmingly” want to be contractors because they want the flexibility to work whenever they want, citing an Edelman study that found 72% of drivers want to be contractors.

That study was commissioned by Uber, however, and other evidence that drivers wish to remain contractors also has the scent of the big money that companies are putting behind the measure. Television ads and campaign mailers feature workers who tout the flexibility gig work gives them, but they have been paid for their endorsements anywhere from $500 to a couple of thousand dollars by the “Yes on 22” campaign, according to publicly available state records.

The initiative’s opponents point to studies that show most ride-hailing drivers…



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