Uber Technologies Inc., Lyft Inc. and other app-based ride-hailing and delivery services spent $200 million in a winning bet to circumvent California lawmakers and the courts to preserve their business model by keeping drivers from becoming employees eligible for benefits and job protections.
The titans of the so-called gig economy bankrolled the most expensive ballot measure in state history, which was decided Tuesday with 58 per cent of more than 11 million voters choosing to keep drivers classified as independent contractors able to set their own hours.
Shares of both companies surged 11 per cent to 13 per cent before the opening bell Wednesday after the huge victory.
The outcome was a defeat for labour unions that had pushed for a state law aimed directly at Uber and Lyft, mandating they provide drivers with protections like minimum wage, overtime, health insurance and reimbursement for expenses.
Supporters of Proposition 22 said the outcome showed voters wanted to preserve the flexibility of the current system. Opponents said the companies had bought their own law and vowed to continue fighting for drivers’ rights.
San Francisco-based Uber and Lyft had threatened to pull out of California if they lost. They got additional support in the fight from DoorDash Inc., Postmates and Instacart, which all could have had their businesses upended if it failed.
In the Legislature last year, labour-friendly Democrats passed the landmark law known as AB5 to expand a 2018 ruling by the California Supreme Court that limited businesses from classifying certain workers as independent contractors. The companies sought an exemption, taking their fight to voters with a campaign that included television ads, mailers and messages that appeared on their app for both customers and drivers.
Opponents said the companies exploit drivers to keep profits high and the ballot measure would deprive workers of rights like overtime pay and workers’ compensation, while supporters said the measure would allow drivers to maintain the freedom to work hours they choose and would provide other benefits.
More than $225 million was spent on the race, with unions kicking in about $20 million of that. “The obscene amount of money these multibillion-dollar corporations spent misleading the public doesn’t absolve them of their duty to pay drivers a living wage,” said Art Pulaski of the California Labor Federation in a statement. “The end of this campaign is only the beginning in the fight to ensure gig workers are provided fair wages, sick pay and care when they’re hurt at work.”
Although drivers would remain independent contractors exempt from mandates such as sick leave and expense reimbursement, they would receive some “alternative benefits,” including a guaranteed minimum wage and subsidies for health insurance if they average 25 hours of work a week.
Dara Khosrowshahi, chief executive officer of Uber, sent a letter to drivers late Tuesday thanking them for their support and promising details in coming weeks on how they can enrol in benefits such as accident insurance.