Riley Elliot, a delivery driver for UberEats, went viral after uploading a tearful video on TikTok detailing his financial hardships because of low tips and low wages. Elliot describes a turbulent 45-minute delivery where the customer tipped him $1.50, and UberEats paid him $2.50. The video sparked outrage online about how UberEats can pay workers as little as $2.50 per delivery, relying on the consumer to subsidize the driver’s wage through tipping. The reality for the gig economy of ridesharing and food delivery is that labor laws across many states have failed them. The best example being the passing of Proposition 22, the California law that allows gig-based app companies like Uber, Lyft, Seamless, and Door-Dash not to classify their workers as employees, relegating them to “independent contractors” who are not eligible for many employee protections and benefits.
Proposition 22, commonly known as Prop 22, carves a loophole in California’s AB-5 law, which protected independent contractor’s and freelancer’s eligibility for labor rights and protections. Prop 22 creates a new employment status that decimates drivers’ eligibility for state unemployment insurance. It provides no overtime, no sick leave, no workplace discrimination protections, and no right to bargain collectively. The law is a blow against drivers who are predominately Black, people of color, and immigrants, especially in the context of the COVID-19 pandemic, which has exacerbated economic inequality. The proposition is also increasingly challenging to repeal since it requires an unprecedented seven-eighths majority vote in the California legislature.
Though not the intended winners, companies beyond the gig economy saw their opportunity to use Prop 22 for the same labor at a lower cost. In January, supermarkets Vons, Pavilions, and Albertsons announced that they would fire their full-time essential workers, who receive benefits, to replace them with subcontractors from DoorDash.
But how did a law that hurt drivers like this pass? The answer: Millions in lawsuits and anti-labor ad campaigns. Prop 22 was the most expensive ballot proposition in the history of the United States. Rideshare and delivery startups contributed over $184 million to its passage in legal fees and the ad campaign “Yes on 22.” They hired public relations firms like MB Public Affairs, notorious for advertising Big Tobacco, to craft an ad campaign that convinced the drivers and many other Californians that Prop 22 would create better labor benefits for drivers. The campaign included a message on the Uber App that forced drivers to affirm that they would vote Yes on Prop 22 before giving rides or deliveries.
Prop 22 and its ad campaign “guaranteed” an hourly wage of at least 120 percent of the local minimum wage. However, a study by the UC Berkeley Labor Center disproved the alleged benefits. It estimates the average wage under Prop 22 is as low as $5.64 an hour, a drastic pay cut from the $13 minimum wage guaranteed by California law to employees. The Prop 22 standards only compensate drivers while they provide a ride; it does not pay for time spent “on the clock” or looking for rides. Thus, it does not compensate as much as 37% of the driver’s time. It also does not cover the fixed costs of owning and operating a vehicle.
Prop 22 also failed to provide “assistance” with health care awards and disability coverage. Uber offers no more than $400 per month for health insurance for drivers who hit maximum hours standards. However, to qualify for the stipend, drivers must be the primary policyholder on a current health plan and log at least 25 “engaged” hours per week. These “engaged” hours can take up to 40 hours of work to meet because of the rides-only compensation. Other companies like DoorDash and Lyft made it almost impossible to sue if the health benefits are denied.
Though drivers do not see the alleged benefits of Prop 22, that has not stopped these companies from surging prices and fees under the guise that they will be using the money to pay for the benefits. This is a clear profit-seeking move since keeping drivers and food couriers classified as contractors saves companies billions in costs and has helped fuel billions more in investor value. By one estimate, Lyft and Uber saved over $400 million from 2014 to 2019 by not paying into California’s unemployment fund.
Until now, most anti-labor gig laws have dominated the West Coast, so why should we care as New Yorkers? Because these companies have wasted no time trying to bring them here. In recent years there has been an increase of PACs created to defend and advocate for Prop-22 style laws in New York that are now tied to the Democratic party. With connections stemming from influential leaders like Senate Majority Leader Chuck Schumer and Governor Andrew Cuomo to lobby against New York’s strong driver protections.
It is in the interest of workers nationwide for the California state government to overturn Proposition 22 and other states like New York to be wary of anti-labor laws seeking to exploit gig workers. England’s Supreme Court recently decided that ridesharing and food delivery drivers are not independent contractors. The court considered several elements in its judgment. They stated that since Uber controlled fares, earnings, contracts, and punishment for drivers, drivers are under Uber’s management as employees. Uber is now in hot water across the pond as they might have to pay the 20% VAT on rides.
Montserrat is a Roosevelt Scholar (’22) majoring in Political Science with minors in Public Policy and Economics. She previously served as an Eva Kastan Grove Fellow and has worked as an intern in the private and nonprofit sector at Calcaterra Pollack LLP and UnLocal. She has recently accepted a position at the APSA Ralph Bunche Summer Institute (RBSI) at Duke University. After undergrad, Montserrat plans to serve as a joint J.D/Ph.D. candidate to further her drive for public interest and public policy.
