The fight over whether gig workers are independent contractors or employees intensified this week at the state and federal levels. Challenges ? A once disruptive business model may soon itself be disrupted.
At the state level, this week saw developments in the Proposition 22 saga as companies that rely on gig workers made a slew of arguments against last year’s ruling according to which the law was unconstitutional and therefore unenforceable. Prop 22, a California ballot initiative, enacted in 2020, allowing app-based transportation and delivery companies to continue classifying gig workers as independent contractors rather than employees. In August 2021, Alameda County Superior Court Judge Frank Roesch ruled that the law violated the state Constitution by restricting the legislature’s ability to regulate workers’ compensation rules.
In response to Roesch’s ruling, the same coalition of major gig companies — like Uber, Lyft, DoorDash and Instacart — that spent millions on advertising to convince Californians to vote for Prop 22 filed a lawsuit to overturn the ruling. of the court. On Tuesday, they called the challenge to Proposition 22 an “attack on the powers of direct voter democracy” and inconsistent with California’s heritage of “custody[ing] voters’ powers of initiative and to enforce[ing] their actions as far as possible.
The rehashing of this issue comes as the public comment period for the independent contractor rule proposed by the US Department of Labor draws to a close. The rule, proposed in October, would tighten Trump-era worker classification laws, making it easier for entrepreneurs to achieve full employment status if they are “economically dependent” on a company.
The scope of the proposal is limited to areas such as minimum wage enforcement, which has been a sticking point among union activists fighting to protect gig workers. Proponents of Proposition 22 say the law guarantees that workers earn 120% of their local minimum wage. Critics say app-based companies only count time spent actively driving to pick up and drop off a customer or deliver a meal as “active time,” which leaves out the hours drivers spend driving in busier areas or simply waiting in line for a concert. .
A study found that counting only on-time, Massachusetts workers could earn as little as $4.82 an hour if a similar law were passed in the state. (This sub-minimum wage has been supported by construction workers TechCrunch has interviewed in the past.) In June, a Massachusetts court voted to reject the ballot proposal.
Despite Judge Roesch’s decision, due to the appeal, Prop 22 remained in effect throughout the year. The appeals court is due to issue its decision within 90 days, but lawyers involved in the case believe it will come much sooner.
At the federal level, those following the public comment period expect a decision on the employment status of gig workers in the United States at any time. It is not yet clear how the adoption of the DOL rule would affect Proposition 22, should the California Court of Appeals allow the ballot initiative to stand.
What would employee-driven carpooling even look like?
There’s a reason companies that rely on gig workers feel threatened by what could be a complete shake-up of their entire business models, so we can expect to see them continue to fight back against everything. change through a variety of appeals and countersuits. In the background, some companies have made a point of not relying on site workers, perhaps sensing the way the legislative wind is blowing.
In New York, Revel offers an all-Tesla, all-employee ride-sharing service, which I’ve used and drivers tell me they like. Another on-demand ride-hailing service that relies on employees is Alto, which operates in parts of Dallas, Houston, Los Angeles, Miami, San Francisco, and Washington, DC.
In Alto’s commentary on the DOL’s decision, the company highlighted the liability and costs it incurs that competitors avoid via the independent contractor model, such as paying employees hourly for all hours. that they spend driving, rather than only paying them for the time incurred. Alto said while this lowered costs for competitors, it also encouraged an oversupply of drivers on public roads, leading to traffic congestion and higher emissions.
“With self-employed drivers, large-scale transit operators intentionally oversupply the market because it does not increase their costs and creates a ‘free’ consumer surplus (for businesses) through downtimes. shorter wait times,” the comment read. “But, artificially reducing wait times with oversupply is unsustainable for drivers and leads to many of them earning far less than the minimum wage in the jurisdiction in which they work, measured on a basis of total time (not committed time).”
Alto called on the DOL to recognize the economic reality of the ridesharing industry — drivers are an integral part of ridesharing as a business. The work of drivers depends on the existence of carpooling companies. As a result, drivers are economically dependent on transit companies, which puts them in the category of employees, according to Alto.