Treat Workers As Employees? Uber, Lyft And Others Are Scrambling For A Compromise

By Johana Bhuiyan Los Angeles Times

WWR Article Summary (tl;dr) A bill is currently winding its way through the California state Senate that could set a precedent for regulating gig work across the country.

Los Angeles Times

Faced with a looming threat to their way of doing business, Uber, Lyft and other major on-demand companies are trying something they've historically been reluctant to do: seeking compromise.

Anxious to preserve the freelance work arrangements upon which they've built their vast workforces, these companies have been pushing for a grand bargain that will satisfy labor groups' demands and stave off a California bill that could force them to treat workers in the state as employees, an outcome that would damage their hopes of long-term profitability.

In recent months, Uber, Lyft, DoorDash, Postmates and other companies have been in discussions with officials at two labor unions, including local chapters of the Teamsters and Service Employees International Union, over a possible legislative alternative to California Assembly Bill 5, now working its way through the state Senate.

The proposal, details of which are still in flux, would allow the firms to continue to treat workers as independent contractors while providing them some benefits and protections typically reserved for employees. (The California Labor Federation, which represents most of the state's unions, remains committed to obtaining full employee status for on-demand workers.) At least two of the companies, Postmates and DoorDash, have also commissioned surveys to feel out how such a deal would play with Californians.

The longer the discussions drag on, the greater the pressure on the companies to secure a deal. Last week, an SEIU official in New York State criticized a bill that attempts to strike a similar balance wherein gig workers remain contractors but qualify for some benefits. In an op-ed in the New York Daily News, the president of New York's local chapter of SEIU, Hector Figueroa, called the bill a "giveaway to gig companies" that "cherry picks which labor laws to apply to gig workers."

"The Teamsters believe every worker in California deserves to earn a living wage, benefits, and to be able to join together with their co-workers so they can set standards for their jobs," Doug Bloch, political director at the local chapter of the Teamsters union in California, said in a statement.

If it were to become law, AB 5 would codify and give additional legal force to the April 2018 state Supreme Court ruling known as the Dynamex decision, which created a three-part test for companies across industries seeking to classify their workers as independent contractors.

Its most stringent requirement is that workers must be treated as employees if they provide a service that's core to a company's business. While Dynamex is now the law, AB 5 would ensure that workers would not have to file suit against companies one by one to make sure it is enforced.

Treating their workers as employees would mean the tech companies would have to guarantee a minimum wage and overtime, pay into Social Security and Medicare, and offer unemployment and disability insurance, workers' compensation, sick leave and family leave. They would also have to reimburse workers for mileage and maintenance of their vehicles.

On-demand companies say this legal regime would handicap their ability to recruit workers to keep pace with demand and add significant costs to their bottom line at a time when none of them is yet turning a profit. For Uber alone, the additional cost could be as high as $500 million per year, according to a study by equity research analysts at Barclays.

Echoing their arguments, the California Chamber of Commerce last week asserted that classifying ride-hailing drivers as employees "would undercut the innovation of a business model that has powered economic growth for the state," resulting in less flexibility for drivers and longer wait times for passengers.

Historically, consultation and cooperation have not been preferred ways of doing business in the on-demand sector. From the start, Uber and other on-demand platforms have faced challenges to their legality, from their classification of workers to their liability for accidents to their regulatory status.

The default response to such challenges has been to fight back, both in court and in the arena of public opinion. Over the years, they've made various concessions to the demands of workers and customers, but as recently as the beginning of this year Lyft sued New York City to stop it from imposing a minimum wage requirement.

The major on-demand players have been equally fractious in their dealings with each other, jousting for workers and customers and employing the occasional dirty trick to find an edge. For these companies now to be harmonizing their messaging and seeking parlay with some of the same parties they've long rebuffed shows how seriously they're taking the threat AB 5 represents.

What companies are proposing would look a lot like the broad framework Lyft and Uber executives laid out in an op-ed in the San Francisco Chronicle recently. It would include some kind of wage protection, potentially tied to the state minimum wage; a portable benefits fund that each company would contribute to; and some sort of formal worker association through which contractors could voice their concerns.

"The goal is to preserve drivers' independence," Lyft said in a statement, "while guaranteeing a minimum earnings floor, establishing worker-directed portable benefits, and creating a new association in partnership with labor groups to administer the benefits that best meet driver's individual needs."

"DoorDash's focus is on crafting legislation this year that preserves the flexibility and autonomy Dashers value while establishing groundbreaking protections and benefits tailored to the unique nature of work on our platform," Max Rettig, head of public policy at DoorDash, said in a statement. Uber did not provide a statement but confirmed its participation in the discussions.

Both Postmates and DoorDash have conducted early polling to get a read on how California residents feel about the general contours of the legislative deal.

"Modernizing a safety net that decouples the delivery of benefits from an historical employment model (and enacts new floors of protections for a mobile workforce) is hard work," Vikrum Aiyer, the vice president of public policy at Postmates, said in a statement.

"That's why we've been routinely surveying Californians, including workers who use Postmates across the country, to understand their sentiment around the gig economy and how they view a new deal like the one we have been whiteboarding with labor," he continued.

Uber and Lyft attempted to mobilize drivers this month to lobby for their cause, citing the possibility of less flexible hours and lower pay if they were treated as employees.

But some of those workers say they don't trust companies such as Uber and Lyft to offer consistent wages in the existing contractor model and favor government-mandated labor protections.

Rebecca Stack-Martinez, who drives for Uber and Lyft, says she initially preferred to remain a contractor because of the flexible schedules but has come to believe AB 5 is necessary.

"These companies have had their chance to do right by the drivers," said Stack-Martinez, who also is a member of labor group Gig Workers Rising. "But I think it's come to a point where drivers realize Uber and Lyft can no longer be trusted to do the right thing. And so it's going to take this legislation to force them to do the right thing, even though I would say the majority of drivers would prefer to stay independent contractors."

Ultimately, the hope is if these labor groups and tech are able to come to some sort of agreement, the deal could be proposed through some kind of legislative vehicle.

One possibility is that it could be proposed as an amendment to the Assembly bill if its author, Assemblywoman Lorena Gonzalez (D-San Diego), is open to it. Or, if AB 5 moves through the Senate faster than a deal could be cobbled together, it could be introduced as a separate bill, according to some of the companies. They declined to comment on how far along negotiations are, though they've confirmed they have yet to come to an agreement with labor.

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