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The Gargantuan Gig Swindle

Silicon Valley buys itself a labor law

Over the course of several months, Uber, Lyft, Instacart, DoorDash, and Postmates invested more than $200 million in a scheme to strip their workers of labor protections guaranteed under California state law. “They effectively bought themselves an exemption from the law,” labor lawyer Shannon Liss-Riordan says. “They don’t have to provide their workers with any protections under the wage and other employment laws.”

The gig companies paid about $24 per vote; labor mustered only $4. On November 3, that investment paid off when Prop 22, the labor law they wrote themselves, passed by a wide margin. Uber and Lyft stocks both popped overnight, jumping 14 percent and 21 percent, respectively. (The delivery companies are privately held.)

California’s current rules governing independent contractor status went into effect in January. AB5, known as the “gig worker” law, applies a strict test to determine whether a worker qualifies as an independent contractor. As in Massachusetts and New York, the California law was written expressly to  combat labor exploitation by ride hailing and courier businesses. In the eleven months since AB5 became law, the companies have been openly flouting it. They have even failed to turn over employment records for workers trying to collect unemployment during the pandemic.

The companies pitched their bespoke law on a platform of freedom and benevolence. Without Prop 22, drivers would be forced to punch a time clock, they said. They would become wage slaves or lose their jobs altogether. Christina Wilson, an Instacart employee contractor, took that message to heart. “I just don’t understand if people want to be employees why they don’t just go get a job,” she told me via Facebook, adding, “I don’t think that those who want to be classified as employees understand exactly what it would entail, the freedoms that we would have to give up.”

The success of Prop 22 makes working life harder, more precarious, and less remunerative for drivers and delivery people.

In fact, nothing in AB5 requires employers to set work hours, as labor groups pointed out. Employees from grocery baggers to bus drivers control or negotiate their work hours all the time. In our age of plague, many workers adhere to no schedule at all. Alas, a vote against freedom is a vote against America.

The companies also offered new benefits under Prop 22, although these are less than workers received under AB5. The text of the law is deceptive. For example, it includes an earnings guarantee of $15.60 an hour, amounting to 120 percent of the state’s minimum wage (which rises to $13 an hour in 2021). But a study by the U.C. Berkeley Labor Center estimates that the guarantee works out to $5.64 per hour after accounting for loopholes in the law. The companies dispute this figure, but data show a steady decline in driver wages over time: they fell 53 percent between 2013 and 2017.

With a dozen measures on the ballot this year, ranging from voting rights to the standards for dialysis clinics, even a highly engaged voter would struggle to cast an informed ballot. Monty Hindman, a retired Apple software engineer with a PhD in economic history and time on his hands, didn’t really try. “I really don’t know what’s in the law or its ramifications,” Hindman told me by phone, and “no amount of research in the two months before the election was going to solve that problem.”

Instead, he applied some basic principles. “Most of the ballot measures that we vote on in California are funded by these high-rolling campaigns. They have their own agenda they’re pushing, so if I don’t know enough about it, I default to no.” The entire referendum system is broken, he concludes. He had also seen how poorly Apple treated its independent contractors. “They’re pretty much an exploited class,” he said, “It’s terrible how they’re abused.” Hindman added that on the teams of skilled software engineers he managed, contractors couldn’t even join the rest of the team for post-work beers lest a real employee spill any Apple secrets after a couple of drinks.

“Yeah, man. I voted no, brother, because fuck those guys,” he said.

“I voted Hell No on 22,” Pamela Waxman, a young mother from Oakland, told me via email. She didn’t need to study the law either. “Uber asked drivers to aver fealty to 22, and if/when you took a ride with a driver who did, then you got a text that said your driver wanted 22 to pass, and encouraged you to talk to them about it. Is that even legal?” I hesitated to tell her that a San Francisco Superior Court Judge found that it was. Union busters throughout the economy have been employing such tactics for years. They send employees to mandatory meetings at which anti-labor consultants present “the facts” to workers. Uber and Lyft, true to form, automated the process through their apps. Customers had to click on a banner ad for Prop 22 before booking a ride, and drivers had to click through one to open the app.

The success of Prop 22 makes working life harder, more precarious, and less remunerative for drivers and delivery people. It shows what happens when companies have vast amounts of capital—and political speech—at their disposal. And it shows what companies can do when they capture the legislative process from duly elected officials. It would be unfair to say that drivers or delivery people voted against their own interests. They voted for freedom over slavery and a pay raise over a lost job.

A week ago, I would have been inclined to write about Prop 22 as yet another example of broken democracy and late-capitalists’ inventive new forms of labor exploitation. It is certainly that, but I’m feeling less cranky and more hopeful this morning. The legal battle isn’t over, and there’s even a scenario in which the companies adopt the employer-employee model of their own accord.

I’m also encouraged that the companies had to turn California’s popular referendum process. It means that legislators resisted their well-funded lobbying efforts and that courts rejected their claims of immunity. It amounted to a Hail Mary, albeit one with ten of their receivers down field to their opponents’ one. Also, the referendum process garnered more critical national media attention than back room politicking would have.

Liss-Riordan remains vigilant and has already begun to nationalize the battle. She notes that “Trump’s Department of Labor is trying to quickly rush out new regulations making it harder for workers to show they’ve been misclassified.” Democratic Senators Patty Murray of Washington, Sherrod Brown of Ohio, and Representative Rosa DeLauro of Connecticut have introduced bills to extend worker protections to independent contractors. The “Worker Flexibility and Small Business Protection Act” applies the same strict test used in Massachusetts, New York, and California under AB5 to determine a worker’s status. It undercuts fear mongering about lost “freedom” by explicitly protecting flexibility for contractors and employees. If the Democrats win the Senate, such a bill has a real chance to become law.

But even without new legislation, a Secretary of Labor in a Biden administration could interpret the existing Fair Labor Standards Act to define independent contractors in line with AB5 and similar laws in other states, Liss-Riordan says.

The irony of technological change forcing a return to the employer-employee contract would be delicious.

The most interesting scenario is one in which the transportation network companies—as they’re known to experts—decide to abandon the independent contractor model of their own accord. They argue that their new technology demands a new form of labor contract, just as the technology of industrialization created wage labor in the first place. They may create one as technology evolves.

In the transportation arena, electrification and automation are far more transformative technologies than any little smartphone app will ever be. Mollie Cohen D’Agostino, Policy Director for the Three Revolutions Future Mobility Program at UC Davis, says that Uber and Lyft have been leading progressive forces on electrification. They want to have entirely zero emissions fleets by 2030. Their efforts to incentivize their independent contractors to buy EVs have so far failed. To reach their goals, they may end up buying EVs directly. Lyft is already piloting a company-owned model.

Although her organization takes no position on labor issues, D’Agostino says, “For an electric vehicle fleet, it certainly would be better if each driver wasn’t operating so as to maximize their own profit.” The lower operating costs and the ability to coordinate things like charging schedules and routes encourage company ownership of vehicles.

Driverless cars may also drive a return to the traditional labor model. Even though they are poorly paid, drivers are by far the most expensive part of these companies’ operations. A driverless fleet is still a long way off—and poses little threat of mass unemployment—but it will have to be centrally managed. D’Agostino argues that Uber and Lyft will want to learn to operate a fleet themselves before their robot cars arrive. Lyft already has a pilot, she says.

The irony of technological change forcing a return to the employer-employee contract would be delicious. Marxists see Prop 22 as part of the ongoing battle between capital and labor. But Marx himself began not with the struggle over the means of production but with the technology of production itself. Technology drives history and determines social and economic relations. The ride-hailing and delivery companies agree with Marx when they insist that their technology creates a new form of labor. If that’s really the case, the technologies of automation and electrification may force them to accept a century of progress on worker rights after all. As I say, today I’m feeling hopeful.