Uber and Lyft face an existential threat in California – and they lose

29. In August, Uber and Lyft released a dramatic, unexpected proposal as a last ditch effort to derail California legislation that could potentially explode the racial industry. In their proposal, the companies promised to pay their drivers $ 21 an hour (but only while on tour), give them sick leave, and "give them" to "have a collective voice" – a nod to drivers forming a union.

The proposal "will both protect drivers' ability to work on their own terms while maintaining the reliable rideshare experience you have come to," the petition states. It is most likely to fail.

California state senators are ready to vote on Assembly Bill 5, which will make it harder for so-called gaming job companies to classify workers as independent contractors. If passed, the bill could force Uber and Lyft to appoint drivers as employees, a move both companies admit could throw them in a tailspin in the unknown.

entrepreneurs, ”Uber wrote in its S-1[ads1] filing with the Securities and Exchange Commission earlier this year.

It's a fantastic turn of events: The state that monitored the birth of Uber and Lyft and the gaming economy they helped create are now shrinking to fix some of the worst effects. Drivers have long complained about poor pay, lack of protection and inability to connect to change. There have been stories of car drivers sleeping in their cars because they can't afford to live in the cities where they work, struggling to make ends meet and feel completely relegated to a faceless algorithm that dictates every move. AB5 is meant to meet these very real concerns.

It will also fundamentally change Uber and Lyft. Uber puts it this way: the bill will "drastically change your rideshare experience once you become familiar with it, and will limit Uber's ability to connect with the trusted rides you expected."

If this sounds like a terrible prediction, it is meant as such. Uber and Lyft face an existential threat in AB5. And they lose.

The companies have sent their expensive lobby teams to Sacramento to persuade Governor Gavin Newsom and lawmakers that AB5 will ruin their ability to do business in the state. But they have now "all but accepted that AB 5 will pass and the governor will sign it," according to the Los Angeles Times .

This has been brewing for over a year now. In May 2018, the California Supreme Court ruled in favor of workers for a document delivery company called Dynamex Operations West; these workers sought status. The drivers for the delivery service first raised the issue a decade ago, claiming that they were required to wear the company's uniform and display the logo while delivering their own vehicles and paying all the costs associated with the deliveries. AB5 is intended to codify the Dynamex resolution into law. And that's what has made Uber and Lyft feel the pinch.

"Obviously they know they're in a tough place," Assemblywoman Lorena Gonzalez (D-San Diego), co-author of AB5, told The Verge . "They violate Dynamex as it is. They know that AB5 is coming."

Gonzalez said she wants to stop misclassification of workers. Her bill would require companies to use a legal standard called "the ABC test "when determining employment status:

A): The worker is" free from the control and direction "of the company that hired them while performing their work.

(B): The worker performs work that falls" outside the employer's usual course or type of business. "

(C): The worker has his or her own independent business or trade beyond the job they were employed for.

Gonzalez warned against any last-minute attempts by Uber and Lyft to present their own solutions to the problems. "These companies have been around for many years now. And they have known that their drivers have these complaints and these problems, and they have done nothing to resolve it. And they have said many times that they came to address it, and it h they are not. ”

California companies are in full panic over the bill. The state Chamber of Commerce and other business groups are lobbying for changes, and have urged lawmakers to consider a long list of exceptions.

As such, AB5 exempts a long list of professions, primarily those where practitioners set their own prices. These include contractors, business-to-business services, freelance writers, fine artists, scholarship writers, graphic designers and foot therapists. The cut also includes doctors, dentists, lawyers, architects, accountants, engineers, insurance agents, investment advisers, direct sellers, real estate agents, hairdressers, hairdressers, estheticians and electrologists.

But most attention has been on Uber and Lyft. After all, it is hard to ignore a history of start-ups that made billions by exploiting weak labor protections, only to be brought down by a galvanized labor movement. The bill is being pushed by major unions, including SEIU, Teamsters, the United Food and Commercial Workers and the California Labor Federation, which represents 2.1 million workers.

AB5 has also become a bellwether for the 2020 presidential election. Several top Democratic candidates, including Senators Elizabeth Warren (D-MA), Kamala Harris (D-CA), and Bernie Sanders (I-VT), as well as South Bend Mayor Pete Buttigieg has joined the bill. Buttigieg spoke at a meeting in support of AB5 last week.

The bill passed the Senate Appropriations Committee last week. Now it is heading towards full Senate floor, probably in September. Newsom, which has strong alliances with both the labor and technology sectors and technology companies, is pushing the two sides to negotiate a deal.

Uber and Lyft can see the writing on the wall – and the companies are already planning their next move. According to the LA Times the companies that will run tours say they will spend $ 60 million to fund a ballot by 2020 to create a new driver classification. Food delivery service DoorDash, another concert company that classifies couriers as freelancers, says it will chip in $ 30 million. Uber and Lyft also support their own bill to create a new designation for gig economy workers, but look at the ballot paper as a "last resort", according to the Times .

This desperate maneuver contrasts with the blatant attitude of Uber CEO Dara Khosrowshahi, who when asked about AB5 in a revenue interview earlier this month. "If AB5 passes, it will simply be a qualification of existing law. It does not immediately turn drivers into employees," he said.

Investors take the same attitude. "The immediate impact on Uber / Lyft will be more limited than today feared," Wedbush analyst Daniel Ives said in a note to investors. He argued that the bill is so transformative that "implementing and enforcing them will be challenging, and likely delay an immediate impact."

Part of the problem has to do with President Donald Trump and his nominee for the National Labor Relations Board. Earlier this year, a federal labor lawyer in the Trump administration issued an opinion that maritime drivers are independent contractors, not employees.

The Department of Labor has also stated that gambling jobs such as Uber drivers are contractors who are not eligible for minimum wage and overtime pay. A federal judge initially ruled similarly last year in what is said to be the first classification of Uber drivers under federal law. This means that even if AB5 goes into law, unions that seek to organize drivers will face strong headwinds. Uber and Lyft could force the organization of drivers to vote by the Trump-controlled National Labor Relations Board, which could undermine that effort.

This has been brewing for many years. Hundreds of Uber drivers went on strike ahead of the company's long-awaited IPO in May. Drivers said they want better working conditions and more transparency from Uber in terms of pay and access to the platform. Uber's stock price has fallen steadily since the IPO amid concerns about the company's lack of profitability; Uber lost a staggering $ 5.2 billion in the second quarter of 2019, mostly due to one-off payments.

There are some working groups that represent drivers, but all of them lack the ability to collectively negotiate with companies on important issues such as pay scale, hours and workers' compensation. This could seriously hamper the law's most hoped-for effects: an authorized driver class that forces Uber and Lyft to come to the table to hammer out a collective bargaining agreement.

Still, California's passing of AB5 can have a domino effect that inspires other states to codify their own ABC rating tests, said Shannon Liss-Riordan, a lawyer who represented thousands of drivers in a class action lawsuit against Uber. But there will be strong opposition from Uber and Lyft, which has deep pockets to spend on lobbying and public relations campaigns.

"They will continue to donate money in their misinformation campaign to convince voters that their refusal to provide employment protection to workers," said Liss-Riordan, now running for the U.S. Senate in Massachusetts. "What it does is let them shift all the expenses and workloads from themselves to the workers whose workforce has made these companies what they are today."

Uber and Lyft have long argued that drivers do not want to be classified as employees, preferring the flexibility to set their own schedules and run for multiple apps that come with gaming jobs. "Our drivers consistently tell us that the reason they value Uber is that they value their freedom," Khosrowshahi said on revenue. "They are their own boss. They run their own business."

But Liss-Riordan claimed it to be false. Uber and Lyft try to tricking their own workers into thinking they would have to give up flexibility if they win employment protection, she said. "Having represented thousands of gig workers over the last six plus years, I know it's a lie."

Michael Reich , professor of economics and co-chair of the Center for Wage and Employment Dynamics at the University of California at Berkeley, agrees that if California drivers were classified as employees, their employers could provide them with improved pay and benefits and full reimbursement for driving expenses, let drivers organize themselves while retaining driver flexibility during business hours. "Nothing in federal or state law prevents employees from making a difference or similar blockages of work hours each week, "Reich told The Verge .

Uber and Lyft describe driving as a "side walk" – and for many drivers, it certainly starts that way. So did Edan Alva, who started running for Lyft eight years ago to help make ends meet. But after he lost his main job, driving became his main source of income. And that's when he became aware of the inequalities in the system.

"I found it difficult for me in the Bay area," Alva told The Verge . "It became an existential battle to make enough money to finish the week, ending the month."

He said without regard to costs, he earns about $ 15- $ 20 an hour driving for Lyft, but after paying for gasoline, insurance, and vehicle maintenance, it fell to as little as $ 4 per hour. Alva was one of hundreds of drivers who have traveled to Sacramento in recent months to lobby for AB5. He believes that Uber and Lyft cannot be trusted to do the right thing by drivers, despite the opposite wishes.

"If a company cannot maintain profits and pay fair labor," he said, "then that company shouldn't exist."