It has only been two weeks since Proposition 22 won in California, but app-based gig companies have already provided them with new talking points and a roadmap forward, as they seek to nationalize the ballot measure that preserved the misclassification of delivery and ride-hail drivers as independent contractors.
Uber, for example, already has a new title it’s going to start pushing called “IC+,” which stands for “independent contractor plus.” On Uber's earnings call earlier this month, chief executive Dara Khosrowshahi was confident that "the IC+ model" is "going to win." It's a new name for the third category worker that the company spent months before Election Day advocating for, has spent years advocating for, and intends to take nationwide.
Misclassification is integral to the continued existence of the gig economy. Firms like Uber are fundamentally unprofitable, with unit economics that are worse than traditional operators in the industry. Employing drivers to work for such a company would mean paying for expensive but basic rights won by full employees such as a minimum wage, health insurance, worker’s compensation, and more. Classifying drivers independent contractors saves Uber the costs of providing such benefits, but leaves open the risk that future regulations or legal battles could close this exploited loophole. To that end, IC+ is the name for Uber’s longstanding effort to disrupt regulations by writing and proposing laws that institutionalize a category of workers, neutralize future threats to this model, and allow Uber to return to selling its investors on its inevitable profitability.
On August 10, Khosrowshahi wrote a New York Times op-ed titled "I Am the C.E.O. of Uber. Gig workers Deserve Better” that pre-figured this effort. "Uber is ready, right now, to pay more to give drivers new benefits and protections," Khosrowshahi wrote, even as his company was spending tens of millions of dollars to minimize the scope of benefits and protections owed to drivers. Khosrowshahi asked for regulators to preserve misclassification while asking for reforms that would institutionalize it; states should mandate the industry create benefit funds for Uber to contribute to instead of suing Uber for using misclassification to shirk unemployment insurance taxes and wage claims.
On the same day, Uber released "Working Together" an 18 page document mapping out "a new model” for platform workers. This document towed the same line as Khosrowshahi's op-ed, albeit with more action items.
To ensure platform work was "widely accessible," the document calls on states to "extend laws to protect independent workers form discrimination, harassment, and prejudice." To ensure workers receive "benefits and protections," Uber asked for lawmakers to mandate industry-wide benefits funds and accident insurance coverage. To "maximize their earnings," Uber pledged to "provide transparency to drivers on what they can expect to earn." To ensure platforms "listen to the voice of independent workers," Uber pledged to "undertake a national survey," "engage with representatives," and register its workers to vote. And to help gig workers realize "growth," the company wrote it would invest in "lifelong learning.”
For the most part, this is a rhetorical pitch that sells policies that primarily benefit Uber as ones that will also yield significant benefits for drivers.
The dual calls to “listen” to gig workers and to protect workers from discrimination—presumably by extending protections against discrimination in any employment decision under Title VII of the 1964 Civil Rights Act—might improve workplace conditions, but they should be understood as attempts to pre-empt the sort of organizing that might catalyze a wave of collective bargaining or unionizing among gig workers. Uber has, after all, spent years pushing anti-union propaganda onto its drivers and offering alternatives to driver unions such as trade associations.
We should expect to see, then, moves by Uber and its coalition of gig companies to undercut any potential for their workforce to realize independent power through collective bargaining rights. A glimpse of this appeared in 2019 when Uber and Lyft attempted to forge a backroom deal with the Service Employees International Union (SEIU) to carve out exemptions to Assembly Bill 5, a California law that promised to reclassify independent contractors—specifically app-based delivery and ride-hail drivers. To hedge against such moves, some advocates called on California to go ahead and pass laws that would allow gig workers to collectively bargain and unionize. Uber will likely move to neutralize such threats. It may get the chance in New York, where Governor Andrew Cuomo once called gig economy misclassification “fraud,” and has signaled a desire to compromise.
Similarly, Uber’s pledge to be transparent about earnings may offer insight into the shape of its future efforts. In the past, Uber has been notoriously hostile to attempts to share any more of its data than it needs to, at risk of undermining the legal argument surrounding classification status. Currently, Uber is fighting an EU ruling that drivers have the right to obtain data its algorithms collect on them, fearing it will shed light on how inflexible platform work actually is.
In the United States, Uber and other gig companies regularly share selective slices of data with researchers as part of an effort to reach favorable outcomes in academic analyses of their platforms and its labor conditions. In New York City, Uber and Lyft have long blocked drivers from receiving unemployment insurance by not reporting driver incomes to the states, in part because only employees receive unemployment insurance. In July, however, drivers won a lawsuit and a federal judge ruled for the purposes of unemployment insurance Uber and Lyft drivers are employees.
Future Prop 22 models, then, will have to figure out how to address the question of information asymmetry and tackle it head-on. Too much information, either about the platform’s algorithmic overseers or about driver earnings, could paint a picture of drivers who clearly fail to meet any reasonable classification of independence or flexibility in their work. Too little information and they risk a domino of lawsuits from drivers and regulators who may go beyond asking for transparency and begin demanding more, as was the case in California and New Jersey. And in states like Illinois where drivers are already treated like employees for the purposes of unemployment insurance, the company will have to either challenge rulings it has already lost on this matter or address this issue in future battles.
In June, Lyft formed a political action committee in Chicago named “Illinoisans for Independent Work” and a $1.2 million infusion from the company. The company offers no substantive information on its website or Facebook page. It has, however, already spent hundreds of thousands of dollars in anticipation of the state legislators indicating they’d support bills like AB5 if introduced. From July to September 30, the group spent well over $400,000 on consulting, website design, digital advertising, and telephone polling. The group spent another $233,486 on political mailers. Since October, the firm has spent $136,999 on 50 Democratic and Republican state legislatures.
In a November 10 earnings call, Lyft chief executive Logan Green told investors "We're continuing to engage with policymakers across the country and believe that the policy solution that California voters chose can provide a model for other states,"
Other Prop 22 advocates are even more enthusiastic about what the model could serve to nationalize not only for the ride-hail industry, but for others dominated by more traditional employment arrangements.
“Workers in all sorts of industries—from agriculture to zookeeping—could benefit from the structure that Prop. 22 provides, if it were extended to them," writes Shawn Carolan in The Information. Carolan was a partner at Menlo Ventures, which was an early Uber investor. "The existence of flexible work arrangements in fields like nursing, executive assistance, tutoring, programming, restaurant work and design suggests that a Prop. 22 inspired approach could make sense there as well.”
This omits a few key details. There is the fact that a Berkeley Labor Center study found Prop 22 would net ride-hail and delivery drivers a minimum wage of $5.64 an hour—California’s minimum wage is $12 an hour. Consider also how in many industries, a “flexible work arrangement” is not some natural or efficient outcome, but the result of decisively anti-worker efforts by firms to offload costs onto workers by misclassifying them.
Carolan also makes little effort to hide his excitement for Prop 22, going so far as to suggest it promises a future where "the invisible hand would be able to work its magic”, somehow improving working conditions and services. He also insists that creating an "operating system for flexible work" would create a world where "[gig] workers across industries gain security, the relationship between employees and employers is strengthened, and the economy benefits from a more financially secure population, continued innovation and countless new efficiencies."
The suggestion by Carolan that “employee” workers and “independent” gig worker arrangements can live in harmony is either naive, ignorant, or deceptive. Spreading gig work and moving worker classification away from employment are attempts to spark a vicious race to the bottom as we have seen constantly in construction, nursing, and the taxi industry, but also in the gig economy itself when more “flexible” arrangements are introduced.
At the federal level, Joe Biden and Kamala Harris oppose Prop 22, but the Biden-Harris Labor Department transition team is led by potential Secretary of Labor Seth Harris, who co-authored a paper formalizing the "independent worker" category now championed by Uber. Brandon Magner reports in his Labor Law Lite newsletter that, at the very least, Biden’s NLRB could pave the way for drivers to be reclassified as employees "for the purposes of unionizing, collective bargaining, and other collective rights" that would not immediately reverse state-level exemptions but provide a strong first step in the right direction.
All this is to say that things are far from over. As the gig companies take Prop 22 nationwide, they enjoy a number of advantages, but each one is fraught with legal contradictions awaiting judicial scrutiny, vulnerable pressure points for labor to squeeze, and uncontested political battles that a Biden-Harris administration could resolve in favor of workers. "Those in power won't give up willingly,” UC Hastings law professor Veena Dubal and AI Now Faculty Director Meredith Whittaker write. “Our job now is to build solidarity and fight to take it back.”