At The Frisc, we focus on San Francisco. This election season, we’ve asked SF supervisor candidates for their positions on five major issues and explored the context for several measures on the local ballot. We don’t usually cover California propositions, but readers have been asking us to weigh in.
While all 12 state measures are relevant to SF, we’ve decided to tackle one that was born and bred in our city: Proposition 22. Here’s where we put our election coverage disclaimer: The Frisc follows nonprofit rules. We don’t endorse political parties, candidates, or measures.
We’re not going to tell you how to vote on Prop 22. But we feel strongly, more than with any other measure on the ballot, that this initiative needs addressing. For starters, it is the most expensive initiative campaign in California history, even when you factor in inflation.
Prop 22 was crafted and is funded to the tune of nearly $200 million, at last count, by four companies, Uber, Lyft, DoorDash, Instacart, and Postmates (bought by Uber), to give themselves an exemption to the existing state law called AB 5.
You may have used one of these firms to get somewhere or to have food delivered, especially under the pandemic lockdown). You or someone you know might even drive for them.
If Prop 22 passes, the drivers at the heart of these services would remain contractors, not classified as employees as AB 5 requires.
Locally grown
The companies sprang from the same expanding VC and tech ecosystem that has migrated from Silicon Valley up to San Francisco. They have their HQs in the city; most were founded in SF too. In just a few years, they have made themselves an integral part of our city life. Like so much else in the tech world, their modus operandi is to grow fast, grab customers and market share, and deal with blowback later.
While popular, these companies are all notoriously unprofitable. They have counted on their remarkable convenience as a justification against the need to fix the problems they create, like tons of extra traffic that clogs streets, slows public transit vehicles, and provides another reason for antigrowth advocates and NIMBYs to block new housing and development. Meanwhile, they refused for years to divulge data to city planners.
Now, just like vaping firm Juul did last year when its business was threatened by San Francisco restrictions, the gig economy companies want to block or overturn rules that don’t grease the wheels of their business models.
The 2019 state law, AB 5, is a labor law. It formalizes the distinctions between independent contractors and employees, and it entitles employees to wages and protections. (A separate bill carved out exceptions for aestheticians, artists, photographers, writers, and others. Simply put, it was amended through the legislative process. That’s the beauty of legislation; more on this below.)
Under AB 5, California companies hiring workers must perform an “ABC test.” A worker is considered a contractor if they satisfy three conditions: a) The worker is “free from the control and direction” of the employer; b) the worker does work “outside the usual course” of the company’s business; and c) the worker is “customarily engaged in an independently established trade, occupation, or business … as that involved in the work performed.”
That’s quite a bit to unpack, but the point is that it’s virtually impossible for Uber, Lyft, and the others to wiggle out of their legal responsibilities. When you’re earning money by driving for one of the platforms, you are not “free from the control and direction” or the employer. (You rely on the app for pickups and drop-offs and whatnot, and you’re bound by the platform’s rules.) Your driving isn’t “outside the usual course” of any of their businesses; rides and deliveries are the very core of what they do. Finally, when you sign on it’s not likely that you already are driving for money as an “independently established trade, occupation, or business.”
So according to the law, the drivers are to be regarded as employees. What’s more, Uber and Lyft were sued by the state’s attorney general earlier this year because they were misclassifying drivers. Their appeal was just unanimously rejected. Time is running out for them — unless Prop 22 passes.
Antisocial network
The proposition is do-or-die for the gig companies. Even before the pandemic, they were burning through their venture cash hoards to grow, then hope they could eventually become sustainable. This is crucial: Their business plans rely on drivers not being employees. They don’t pay so-called “driver partners” a minimum wage or overtime, nor do they cover unemployment insurance, workers’ compensation, or sick days. Drivers are on the hook for gas, insurance, car washes (to avoid being poorly rated, natch), and maintenance, and also must do their own financial accounting.
As long as customers keep ordering rides, the gambit has worked — nowhere more so than in the companies’ hometown of San Francisco, the nerve center of technology, where we’ve exalted innovators to the hilt, and let public institutions like Muni deteriorate so that of course, we’ll take reliable and cheap car rides to meet personal transportation needs. In tandem, we can tell ourselves that it’s not that bad a hustle for drivers — at least for those who keep up with the platform’s constantly updating policies and receive high ratings. Who isn’t for innovation? Who doesn’t like hustle?
Yet the reality has overtaken the hype. The status quo has gotten more brutal as drivers have seen their cut of fares decline year after year. The companies are countering with Prop 22, which contains overdue gestures, promising to give drivers a minimum wage slightly higher than required and some benefits too.
Even in proposing improvements, though, they could only go so far: “This measure requires companies to pay 120 percent of the local minimum wage for each hour a driver spends driving, but not time spent waiting,” the state’s legislative analyst says. Same goes for Prop 22’s health insurance stipend — better than nothing, but calculated so that it doesn’t include waiting time either.
Once you find out that estimates of waiting time and driving without a fare — known in transportation circles as “deadheading” — range from 30 percent to as much as 60 percent, it’s not only clearer where the extra traffic is coming from, it’s also difficult to see Prop 22 as more than a belated sop.
The gig economy companies have commissioned one study after another that says Prop 22 would be a higher-paying, win-win-win arrangement for everyone. At the same time, UC Berkeley’s Labor Center found that “after considering multiple loopholes … [Prop 22’s] pay guarantee for Uber and Lyft drivers is actually the equivalent of a wage of $5.64 per hour. Harry Truman was president the last time the inflation-adjusted value of the minimum wage was that low.” (Study fights are nerd fun: An MIT working paper on ride-hailing economics, the subject of an Uber CEO’s rage tweet, was later revised to show driver pay after expenses was a staggering … $8.55 an hour.)
Not about the money
Setting aside whether drivers are earning an hourly wage of $5.64, $8.55, $11 to $16 (according to the state legislative analyst), or more based on company-funded studies, there are other matters to keep in mind. First is that drivers’ cars depreciate with every mile. The proposition, if passed, would compensate drivers 30 cents per mile, but again, that’s only for “engaged miles” when they’re driving a customer or hauling a delivery.
Second and more egregious is that Prop 22 would severely limit the ability to amend the rules on ride-hail drivers. You’ve probably noticed that to raise taxes in California, voters sometimes need to approve measures by a two-thirds majority? Prop 22 kicks that up several notches. If it passes, state lawmakers could only make changes with a seven-eighths majority. San Francisco State University political science professor Jason McDaniel says such a safeguard “appears to be an unprecedented supermajority requirement,” as well as “a scorched-earth tactic” that he fears might not register as brazen to the electorate. “Usually such ‘process details’ do not really break through to voters.”
There’s more. The same high threshold would apply to efforts to recognize driver unions, or as Prop 22 says, “any statute that authorizes any entity or organization to represent the interests of app-based drivers in connection with drivers’ contractual relationships network companies, or drivers’ compensation, benefits, or working conditions.” (Italics are ours; the proposition’s full text is here.)
Supermajority mandates, even ones this extreme, aren’t likely to be overturned in court, according to UC Hastings School of Law professor Michael Salerno, an expert on the California legislative process. “It’s outrageous,” he says, “in addition to them saying ‘black is white, day is night, and our employees are not our employees.’”
During the pandemic, we’ve developed more empathy (somewhat performative) for people we have come to call “essential workers,” be they first responders, medical staff, supermarket stockers, and cashiers. But if you’re read this far and have yet to recoil at this attempt to lock down rights for workers who provide an essential service while sitting inches away from strangers or shuttling from restaurant and grocery store to doorsteps, here are some questions to contemplate before casting your ballot:
Should companies be able to cement practically unalterable rules that are favorable to them by writing eight-figure checks and circumventing the legislative process? Should a distinct class of workers continue to be disenfranchised as not-employees and become even more marginalized? Should folks falling through the cracks of our cutthroat and unequal economy be forced into a quasi-payday loan, borrowing against the long-term value of their vehicles?
The Frisc can’t endorse a yes or no vote on Prop 22. But we can ask you one more question: Who’s really taking whom for a ride?
An earlier version of this story misstated the amount spent by supporters of Prop 22. Supporters and opponents of the proposition to date have spent a total of $220 million.
Alex Lash contributed to this report.