Prop 22 Was Declared Unconstitutional, and It's Just the Beginning

On Friday, California Superior Court Judge Frank Roesch ruled that Proposition 22—the ballot measure written by Uber, Lyft, Doordash, and Instacart to deny drivers and couriers the benefits and protections of employee classification—was unenforceable and unconstitutional despite the deep-pocketed campaign’s victory in November. 

Writing in favor of the petitioners—the Service Employees International Union and three drivers—Roesch concluded that Prop 22 appears to only “protect the economic interests” of gig companies and undermined the constitutional authority of the state’s legislature to write and enforce labor laws. Specifically, Roesch pointed at a part of Proposition 22 that required a seven-eights legislative majority to alter Proposition 22, but even then only with the approval of the gig company drafters.

“A prohibition on legislation authorizing collective bargaining by app-based drivers does not promote the right to work as an independent contractor, nor does it protect work flexibility, nor does it provide minimum workplace safety and pay standards for those workers,” Roesch wrote in the ruling. “It appears only to protect the economic interests of the network companies in having a divided, ununionized workforce, which is not a stated goal of the legislation.”

The ruling has yet to go into effect, however, as a final judgement has not been issued and signed by the judge. Gig companies are expected to appeal the decision and petition for a motion to stay the order.

“This ruling ignores the will of the overwhelming majority of California voters and defies both logic and the law. You don’t have to take our word for it: California’s Attorney General strongly defended Prop 22’s constitutionality in this very case,” said Uber spokesperson Noah Edwardsen. “We will appeal and we expect to win. Meanwhile, Prop 22 remains in effect, including all of the protections and benefits it provides independent workers across the state.”

Doordash did not immediately respond to Motherboard’s request for comment, Lyft and Instacart pointed Motherboard to the Protect App-Based Drivers & Services—a group created by Lyft, Uber, Doordash, and Instacart—for comment.

“We believe the judge made a serious error by ignoring a century’s worth of case law requiring the courts to guard the voters’ right of initiative. This outrageous decision is an affront to the overwhelming majority of California voters who passed Prop 22,” said Geoff Vetter, spokesperson for the group. “We will file an immediate appeal and are confident the Appellate Court will uphold Prop 22. Importantly, this Superior Court ruling is not binding and will be immediately stayed upon our appeal. All of the provisions of Prop 22 will remain in effect until the appeal process is complete.”

Getting Proposition 22 passed was not easy, or cheap. Voters were sent mailers that misled them into believing progressive politicians supported the ballot initiative, and the campaign overall cost an eye-watering $200 million.  But these companies have spent even more trying to prop up their business models in the face of growing opposition.

For years, gig companies have operated on the assumption that a combination of minimized labor costs (for example via misclassification), below-cost pricing, and future-oriented moon shot projects would be the keys to their first sustainable profits. Uber—the dominant gig company—has yet to get there despite hiking prices and seeing some early success in preserving misclassification, but at the same time has killed its pipe dreams, exited multiple major markets completely, and has faced global resistance to its plans to rewrite labor laws that head off the threat of reclassification.

Still, the gig economy has no viable path forward except to preserve misclassification schemes, and so companies have pushed Prop 22 copycats and compromises nationwide—but particularly Massachusetts, Connecticut, New York, Illinois—as well as internationally, such as in Canada. They’ve faced resistance each time, have been routed in some jurisdictions, and risk regulation at the hands of a Labor Department that may be unsympathetic to its pleas for the satanic mills to continue running. 

Even if the gig companies win the legal battle over Prop 22 in California, all of these other attempts at replicating it could be points of failure and are likely to face their own legal challenges from unions and driver advocacy groups. 

And even if gig companies succeed in preserving the status quo via the ballot box, it may not save them from an inevitable end. After all, they will have only succeeded in preserving a business model that is demonstrably unprofitable. 

Uber is offering $250 million in bonuses to end the ongoing ride-hail driver shortage but it’s not clear if this is working, or if it will put a dent in the last reported annual churn rate for Uber drivers: 96 percent. Uber has also burned nearly $30 billion over the six years promising sustainable profits it has never achieved. In the first half of 2021, longtime ride-hail analyst Hubert Horan found that after properly accounting for costs and exemptions Uber and Lyft saw profit margins of negative 38 and 49 percent—these numbers are, funnily enough, some of their best ever despite the pandemic. 

Proposition 22 now seems less likely to be a permanent reality, putting its clones in similar jeopardy. But even if it succeeds, it’s only delaying the inevitable.