A California setback for gig economy workers
Referendum on labour rules for platform companies is bad policymaking
The fight for proper protections for gig economy workers has suffered a setback. A California ballot initiative, Proposition 22, this week overturned a state assembly law seeking to give the likes of Uber drivers the legal status of employees rather than independent contractors. While the victory may have led to soaring share prices for Uber and Lyft, it is a loss not only for workers but also for good policymaking. The risk is that it starts to shape laws elsewhere in the US.
Tuesday’s referendum was the latest move by gig economy businesses in a rearguard action against regulations that grant their workers rights including sick and holiday pay. In August, they already lost an appeal over the assembly law in the Supreme Court. They argued that those who use their platforms are not employees but work directly for customers; their apps act solely as matchmakers.
California has a history of bad ballot initiatives: from the 1978 “tax revolt” that helped to cripple the state’s finances to 2008’s Proposition 8, which overturned a Supreme Court ruling against a ban on same-sex marriages. Proposition 22 was the most expensive referendum in the state’s history: $224m was spent on the campaign, almost 90 per cent by the platform companies. DoorDash, a food delivery service, had drivers deliver takeaways in bags emblazoned with “Yes 22”; Instacart, an app which has workers pick and deliver groceries, had them attach “Yes to 22” stickers to orders.
Voters, unlike the judges, may have been persuaded by the argument that additional worker protections would imperil the convenience and low costs of these services, which millions have come to rely on during the coronavirus pandemic. For those anxious about the future they may represent rare chances for employment in a time of mass business closures — unemployment in California was 11 per cent in September, against 3.9 per cent a year ago. Some workers, too, are willing to trade protection for the flexibility offered by the apps.
The gig economy companies have also made several concessions. Proposition 22 said that instead of a minimum wage, workers’ compensation and unemployment insurance, employees would be “entitled to other compensation — including minimum earnings, healthcare subsidies, and vehicle insurance”. These, however, fall far short of what workers would have been entitled to if the measure had been rejected. The minimum earnings only cover time travelling to and with passengers, for example, rather than all the time the app is being used.
Arguments that enforcing the law would take away flexibility were specious. Other jurisdictions manage to maintain higher levels of worker protections alongside a variety of different working arrangements. California’s law, which set three tests for classifying workers as an independent contractor, was a well-judged method to clarify the legal grey area in which platform companies have operated. It defined clearly who ought to count as an employee and should therefore enjoy the rights to which they were entitled.
Unfortunately, other attempts to explore new ways of regulating the gig economy in California are likely to come to nought as the state must submit any alterations to a ballot initiative to a public vote.
Winning in the spiritual home of the tech industry and one of the most important markets for the platform companies is a highly symbolic victory, and is likely to lead to attempts to introduce Proposition 22-style measures across the US, including at federal level. Lawmakers elsewhere should not take the Californian example as their model.