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--:-- Sean Rameswaram: I'm Sean Ramos. On Tuesday's show, we talked about how American democracy, at least at the federal level, is kind of having a legitimacy crisis right now. The media has called the presidential race for Joe Biden, as you might recall. The world seems ready to move on and accept him. All the while, the outgoing guy is being a sore loser, not conceding. Not a great look. But out in California, direct democracy, taking policy directly to the people, appears to be working just fine depending on how you feel about labor laws.
--:-- Sean Rameswaram: Well, as you know, California leads the way for the rest of the country. Carolyn Saeed, she's a business reporter for the San Francisco Chronicle. But this particular measure has national implications, not just for everybody who uses Uber, Lyft, and DoorDash, which are the companies that are most affected by it, basically for the future of work. On November 3rd, Californians voted on Proposition 22. This is sort of a referendum on gig work, on what people think about this new mode of work where you're freelance, you're an independent contractor, you do not have an employer, and you do not have the benefits and protections of employment.
--:-- Carolyn Saeed: Yes, I would say it started two years ago when the California Supreme Court issued a unanimous ruling in a case called Dynamax. The California Supreme Court has made a decision which could ultimately blow up the gig economy as we know it, particularly rideshare companies. Ruling on Monday in a lawsuit, the court decided to limit businesses from classifying workers as independent contractors. They came up with a very simple ABC test. It's a three-part test. For when you're an employee and when you're an independent contractor, and then under that test, most people would be considered employees if they do work under a company's control.
--:-- Carolyn Saeed: Part B. If they do work central to a company's business. Then you have C. And if they don't have their own independent business doing that work. You know, this is a very streamlined, simple test. The California legislature took that Supreme Court case and codified it in a law called AB5 that took effect on January 1st of this year. And was AB5 meant to police Uber, Lyft, DoorDash, these sort of gig companies that have become so essential to our daily lives? AB5 never mentioned those companies specifically or any company specifically. But yes, it was very widely assumed that those companies were in its crosshairs.
--:-- Carolyn Saeed: But they aren't the only ones. I mean, there is a huge amount of low-wage service works like janitorial, child care, home health aides, construction that also are set up as independent contractor jobs. And AB5 makes it more likely that those jobs also can be reclassified as employees. But nonetheless, Uber, Lyft, DoorDash, those types of companies took this kind of personally. Absolutely. Yes, that's a good way to put it. They took it personally.
--:-- Carolyn Saeed: Gig work companies fiercely oppose Assembly Bill 5, saying it would topple their business model and destroy the flexibility their businesses and workers rely on. Rideshare companies like Uber and Lyft take their fight against it to the ballot box. Fighting back with Proposition 22. What was the ballot measure about specifically?
--:-- Carolyn Saeed: So the ballot measure was to give them an exemption from AB5. The ballot measure says that in perpetuity, the drivers and couriers for app-based on-demand services are independent contractors. At the same time, it has some sweeteners. The drivers and couriers would be entitled to some benefits, nowhere near the full range of benefits you get as a real employee, but some. And then it also allows the companies to exert a little more control over them with more training, which they had wanted to do but couldn't before because they didn't want to risk being reclassified as employers.
--:-- Carolyn Saeed: And just to be totally clear, why didn't they want these drivers, gig workers, essential workers even, to be employees? Well, the bottom line is that that would be incredibly expensive for them. It would cost them literally hundreds of millions of dollars a year to cover such employee benefits and rules as minimum wage overtime expense reimbursement workers compensation the range of payroll taxes if they had to turn those workers into employees.
--:-- Sean Rameswaram: How did these huge companies Uber Lyft DoorDash sort of sell this ballot measure to Californians?
--:-- Carolyn Saeed: I'm a busy single mom, and the flexibility of app-based driving works for my family. They spent $205.7 million to sell it, which is the high watermark for spending on any ballot measure in California history. And I think nationwide, it's a high watermark. So they sold it aggressively. You could not turn on your TV without seeing a commercial for it. Lyft started as a new way to earn a little extra. Even if you fast forward through commercials, you would be fast forwarding through five or six of them.
--:-- Carolyn Saeed: App-based food delivery saved me. Rideshare as we know it is at risk. You could not go to your mailbox without seeing it bulging with glossy mailers about this. Up to 90% of app-based driving jobs could disappear. And that's when it was the shutdown of app-based services here. Prices could increase 25 to 100%. That's why I support Prop 22. You couldn't turn on any of the company's apps without getting in-app messages about it. You got text, you got robocalls. They were extremely aggressive in promoting this to Californians. Vote yes on Prop 22. Please join me in voting yes on 22. It will save hundreds of thousands of jobs. Please vote yes on 22.
--:-- Sean Rameswaram: What were these companies like Uber, Lyft, and DoorDash telling their drivers, their delivery people? They started putting messages in the apps to drivers that were like scary, like Prop 22 could pass and you could lose this job type thing. That's not an exact quote. But last week or so, there started to send me messages saying, click here if you support Prop 22. And then if you didn't click on that, there was another thing saying, or click here to learn more about it. Wait, what happened when you clicked no, if you clicked no?
--:-- Carolyn Saeed: There wasn't an option to click no. There was just an option to click yes, I support 22 or tell me more about 22. There was no option to say I don't support it. But drivers were afraid that if they didn't click yes, that the company was keeping track of them and would, you know, have retribution against them. But there was no proof of that. Wow. But that is some next level propaganda. Yep. And they did pretty much convince drivers that this that it was in their interest to vote for Prop 22.
--:-- Sean Rameswaram: Their own surveys, which, of course, we have to take with a grain of salt, but they're pretty much all we have, showed that most drivers supported Prop 22. And I imagine you spoke to drivers in your reporting. What did you hear from them?
--:-- Carolyn Saeed: Well, drivers were very split on this issue. I'm asking you to vote no on Prop 22 because it would allow Uber and Lyft to pay us less than minimum wage. Prop 22, man. That shit needs to pass. We need to vote yes on Prop 22. I need this company to understand we have rights. We are really not independent contractors when you look at the terms that we have. I'm not fucking out here trying to be like a political motherfucker or anything like that. But for reals, though, if this shit doesn't pass, man, I don't know if a lot of us are going to be able to keep driving in California and shit. You know what I mean?
--:-- Carolyn Saeed: You know, about 80 percent of drivers work very, very part time. Many of them work fewer than 10 hours a week and they're doing it, you know, as a gig in between other things. Maybe they have another job. Maybe they're a teacher making income in the summer. Maybe they're a student. So this is not their career or their full-time endeavor. This is just to make ends meet, make some extra money. But about 20% of drivers, for them, this is their full-time job. Igor Traub has been driving for Uber for two years. He often works 10 hours a day on the road because he's got a family to support.
--:-- Carolyn Saeed: I work only here, and I have no other jobs. They basically, many of them fit the profile of the classic taxi driver. Many of them are immigrants with maybe somewhat limited English proficiency. This is what they do, and they do it 10 to 12 hours a day, six or seven days a week. So for those drivers, it might have made more sense to become an employee and get more benefits and protections. For me, it's very important because I have no benefits so far.
--:-- Sean Rameswaram: Was that what the counterargument sounded like to Prop 22 as well? You know, we need to protect workers' rights here?
--:-- Carolyn Saeed: Yes, absolutely. That was exactly the counter argument. Taking California for a ride. No sick leave, no workers' comp, no unemployment benefits. Vote no on the deceptive Uber Lyft DoorDash Prop 22. One ride California doesn't want to take. The opposition was very, very heavily run by organized labor, which raised about $20 million to oppose Prop 22, which is not chump change in any ordinary ballot measure. That would be a very respectable amount of money. But of course, they were outspent by a margin of 10 to 1.
--:-- Sean Rameswaram: Nevertheless, they made a strong case with many voters. For years, Uber and Lyft have been taking advantage of drivers like me. Uber and Lyft wrote Proposition 22 for one reason, to make a handful of Silicon Valley executives richer. Don't be fooled. Stand with drivers and vote no on Proposition 22. There were a couple of unsaid agenda items there too, which is that the unions would love to see the drivers become employees so they could organize them. And the unions would hate to see gig work spread to companies that currently have unionized employees.
--:-- Sean Rameswaram: Okay so what happens on November 3rd with all of the nation attention on Prop 22 and not anything else that was happening on November 3rd what was the result?
--:-- Carolyn Saeed: So the result was a resounding victory for Prop 22. So yes, for Prop 22, over 58 percent saying yes, checkmark there. And it will take effect in mid-December after certification by the Secretary of State, which is just the normal process in California. It's a victory for Uber, Lyft, DoorDash and all the rest. That is correct. And yes, on 22 means that drivers and couriers will stay independent contractors. They will not become employees. There is no path for them to become employees. The only way that anything in Prop 22 can be changed is with a seven-eighths vote of the legislature, which is an incredibly high benchmark that is almost never passed for anything except, you know, let's say Happy Mother's Day or something.
--:-- Sean Rameswaram: So Prop 22 goes into effect in December. Let's start with the positives here. You mentioned that workers will get some protections. What kinds?
--:-- Carolyn Saeed: So Prop 22 guarantees an earnings floor, the minimum amount that workers can make. They can make more than this. But during the time that they are what's called engaged, meaning after they've accepted a ride or delivery until it's completed, they're guaranteed to make 120% of the minimum wage on an hourly basis and to get 30 cents a mile. They are not covered, though, for the time that they're waiting in between rides or deliveries, which can be up to a third of their time. In addition, they have the ability to get a health care stipend if they work enough hours. If they work at least 25 hours a week, they can get a health care stipend of about $360. If they work at least 15 hours a week, they can get a health care stipend of about half that.
--:-- Sean Rameswaram: So it sounds like what you're basically having here is some worker protections in place of real organized labor and sort of drivers having the bargaining power that they might have under, say, a union or, I don't know, a more powerful labor agreement.
--:-- Carolyn Saeed: Exactly. They have no bargaining power. And the companies have extended, at least Lyft has extended an olive branch and said that it wants to sit down with unions and talk about some kind of representation for the drivers, but it would not have any bargaining power over wages.
--:-- Sean Rameswaram: And you reminded us at the top of the show that as goes California, so often goes the rest of the nation. What are the implications here for Uber, Lyft, DoorDash, Postmates, all the rest across the rest of the country?
--:-- Carolyn Saeed: Well, all of those companies would dearly like to see similar structures to Prop 22 in every other state without having to go and spend hundreds of millions of dollars in every other state. What they would like to do is shop this to state legislatures and get this enshrined at that level, which would be a cheaper way to go.
--:-- Sean Rameswaram: Ladies and gentlemen, thank you for standing by and welcome to the Uber Technologies Q3 2020 earnings conference call. Uber and Lyft have both had earnings calls within the past week, since those are the only two public companies. which we're happy to say pass with a healthy margin in California. We feel strongly that this is the right approach. We should be adding benefits to gig work to make it better, not getting rid of it altogether in favor of an employment-only system. That's why going forward, you'll see us more loudly advocating for new laws like Prop 22, which we believe strike the balance between preserving the flexibility that drivers value so much while adding protections that all gig workers deserve.
--:-- Sean Rameswaram: However, there are countervailing forces, as we discussed. Unions heavily oppose this. At the national level, President-elect Biden and Vice President-elect Harris opposed Prop 22, very strongly opposed it. And we should note Vice President Harris, of course, from California. From California. As a side note, her brother-in-law happens to be the general counsel of Uber, but that's probably too much of a rabbit hole to go down.
--:-- Sean Rameswaram: So it's going to be an interesting Thanksgiving. It's going to be an interesting Thanksgiving. Yep. So President-elect Biden and Vice President-elect Harris opposed Prop 22. They support something called the PRO Act, which has been, which was actually first put forward by Bernie Sanders and is supported by most of the Democratic senators, which basically would enshrine some of the same framework as AB5, California's gig work law at the federal level.
--:-- Sean Rameswaram: We don't know what's going to happen with Congress at this moment or with the Senate at this moment. So we don't know if that will get any traction or not. But in Biden's campaign plank, he had a lengthy section talking about worker misclassification being a real issue and that he was going to focus on it. And there's many things he can do even without the Senate. He can direct the NLRB to focus on it. He can direct Department of Labor. He can institute stronger penalties for worker misclassification. And that's all code work for clamping down on gig work and turning more workers into employees rather than independent contractors.
--:-- Sean Rameswaram: We've been talking a lot about these companies and the drivers, but what does this decision mean for the riders? Are things about to get more expensive, cheaper? Do we know?
--:-- Carolyn Saeed: So during the campaign, Uber and Lyft said to customers that rides and deliveries could cost more and be less available if this passes. So now it's passed. So one would assume that would mean everything's the same. But, you know, obviously it's very important that we maintain the independent contractor status. But it will result in probably a 5% type increase in order to cover the incremental, whether it be minimums, whether it be incremental benefits. And we do expect that much of it will be passed along.
--:-- Carolyn Saeed: They both revealed in their earnings calls that, in fact, rides might cost a little more because they are going to have more expenses now and they plan to pass those along to riders. But again, as Dara said earlier, we do believe that it'll be manageable. And we don't believe based on the models we run that it will have a material impact in terms of demand. Which is code for that they won't be huge, you know, that they might be less than, say, 5 percent, because they have lots of, you know, algorithms and metrics to know what kind of price increases the market can bear. But yes, rides might be a little more costly now.
--:-- Sean Rameswaram: What did California learn throughout this process? I mean, they tried to regulate a thing. Almost immediately, that set off this ballot measure. There was this mass propaganda campaign waged on drivers, on employees, on gig workers, as they're called. And then these huge companies got their way.
--:-- Carolyn Saeed: Well, I would say that many people in California learned something we pretty much know here, which is that you can buy a new law if you have enough money. Our initiative system allows anybody with deep pockets to go directly to the voters and make a case to them. It was supposed to enable grassroots democracy, but it has really over the years turned into a, you know, you pay to play system where the more money you have, the more you can influence the agenda to be to your liking.
--:-- Sean Rameswaram: Carolyn Saeed is a business reporter at the San Francisco Chronicle. You can find and support her work at sfchronicle.com.
--:-- Sean Rameswaram: The End Peace and save we see. That may have been too much feeling. Only pay for what you need at LibertyMutual.com. Liberty, Liberty, Liberty, Liberty. Savings vary underwritten by Liberty Mutual Insurance Company and affiliates. Excludes Massachusetts.
