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Can Anyone Stop the Uberization of the Economy?
Photo by Smith Collection/Gado via Getty Images

Can Anyone Stop the Uberization of the Economy?

In January 2020, Henry DeGroot, an Uber and Lyft driver and organizer with the Boston Independent Drivers Guild (BIDG), walked into a room in one of the Brutalist concrete buildings near Boston’s city hall that was about the size of a closet and free of windows — “the depths of bureaucracy,” he said. He and other drivers sat down with people from state attorney general Maura Healey’s office and made a case that, under existing state law, app companies were misclassifying drivers and denying them benefits.

As a result of that pressure, Healey announced a lawsuit last summer seeking a court ruling that drivers are indeed employees under state wage-and-hour law, which would make them eligible for all the accompanying benefits. Uber and Lyft tried to get the lawsuit thrown out, but so far the judge hasn’t gone along. “At a time when Massachusetts’ economy is in crisis with a record 16 percent unemployment rate, we need to make it easier, not harder, for people to quickly start earning an income,” Uber said in a statement when the lawsuit was first filed.

As the suit slowly winds its way through the legal system, app companies are countering it with a legislative solution that would carve out their workers from the standard. Massachusetts Bill H.1234, backed by Uber, Lyft, and other app companies, states that drivers are independent contractors who are not “entitled to some of the protections of an employee.” In exchange, the bill creates portable benefit accounts that the companies would have to pay into and that could be used for health care or paid leave. It also offers some anti-discrimination protections and requires companies to hold occupational-accident insurance for drivers who get injured on the job.

Beth Griffith, the executive director of BIDG, fears that if it passes, Uber will start yanking higher rates and more flexibility away from drivers. Worse, she’s certain that the carve-out will apply to professions beyond the ride-sharing industry and that unionized workers in places like grocery stores are “just going to get fired.” When she talks about the bill with people who don’t do app-based work, she warns them that it will affect them too.

The brewing battle in Massachusetts is just one of the consequences of the passage of Proposition 22 in California last November, a ballot measure bankrolled by Uber and Lyft, to the tune of $200 million, to carve out their workers from a law, AB5, that imposes a strict test for determining whether workers can be classified as independent contractors. A California judge ruled in August that Prop 22 is unconstitutional, but the law is still in effect as the companies appeal.

The California success has now spurred a full-court press across the country to repeat it in other states. Two days after Prop 22 passed, Uber CEO Dara Khosrowshahi told investors the company would start “more loudly” advocating for similar legislation. “We stand ready to work with any and all stakeholders who want to ensure that workers gain more benefits and protections while maintaining the flexibility they overwhelmingly want,” Uber spokesperson Josh Gold told me.

“We don’t believe the status quo is acceptable. It needs to change,” said Jeremy Bird, deputy policy officer at Lyft. “A solution needs to holistically protect [driver] independence and provide benefits. We’re open to any model that does those two things.”

The shape of the legislation the companies back and the tactics they use differ depending on a state’s political landscape. “But they generally share the same philosophy,” said Brian Chen, staff attorney at the National Employment Law Project (NELP), who has been tracking the bills. “These workers should be excluded from employment protections and called something else.”

Although many bills are tailored in an attempt to apply narrowly to drivers and delivery people, other gig companies, such as Handy, have tried to pry them wider, and experts warn they will open the door for other employers to contract out their workforces rather than employ people directly. “It’s an incredible danger to all workers,” Chen said. “This is really about all of us.”

Lyft counters that that’s not the case. “It’s scare tactics to try to broaden this to some sort of slippery slope,” Bird said. “It’s a lack of innovation and the fear of the unknown.”

But Chen contends there are too many incentives for businesses to count workers as independent contractors, rather than full employees, to have it stop with app-based work. Businesses don’t owe independent contractors minimum wage or overtime pay, and they don’t have to pay into unemployment insurance, Social Security, or workers’ compensation on their behalf. If an independent contractor is harassed or discriminated against, the business shoulders no legal or financial liability.

That temptation applies to “any employer who has an incentive to cut labor costs, to cut corners to pad their bottom line,” Chen said. After Prop 22, delivery drivers at grocery stores owned by Albertsons Companies in California were fired and replaced with a service that uses independent contractors. Even in the high-paid technology sector, companies like Google and Facebook already rely heavily on them. A week after Prop 22 passed, a partner at Menlo Ventures, an early Uber investor, wrote an op-ed imagining that the carve-out could apply “from agriculture to zookeeping,” in workplaces as different as hospitals and schools, restaurants and start-ups.

The Coalition for Workforce Innovation, which has backed many of the state bills and is fighting for the right to treat workers as independent contractors on the federal level, is made up of household brands such as AT&T, General Motors, Nike, Starbucks, and Walmart.

“There’s a lot of industries that look at what happened with Prop 22 and recognize that if in a progressive state like California you can roll back workers’ rights for only $200 million, there’s a lot of room to roll back labor protections in many other industries,” said Tyler Sandness, an organizer with Rideshare Drivers United in California. “It gives them the incentive to gig-ify their work so they’re not on the hook.”

That means there’s much at stake in the debate currently raging in Massachusetts.

***

Two years after he moved to Massachusetts from Sudan, Mutwaly Hamid started driving for Uber and Lyft. He had been working in warehouses, but when he decided to go back to school, his friends told him the best way to make side money was to “have your own business,” as he put it, and work for app companies.

At first, the base fare was high enough that he could drive part-time while he went to school for computer science and also send money back home to his parents, three sisters, and four brothers. But soon he realized that he was not, in fact, running his own business where he could set the terms. The companies started to drop the base rates, so much so that he eventually had to leave school and drive full-time just to make enough money.

Then one day in 2019, while vying for passenger pickups at Boston Logan International Airport, he spotted two people in yellow vests. They told him they were trying to organize drivers so they could fight for their rights. Hamid jumped at the chance. “I am from a country that whenever you see something wrong you cannot just watch,” he said. “You have to be part of what’s going on.”

Drivers in Massachusetts like Hamid aren’t content playing defense. Immediately after Prop 22 passed in California, they put forward their own legislation, a Drivers Bill of Rights that was written by drivers. Among its main demands are a minimum wage of $20 per hour, the right to unionize, a process for disputing app companies’ decisions to deactivate accounts over customer complaints, and protections from customer harassment.

A key advantage of the bill of rights, the organizers say, is that it sidesteps the debate over whether or not drivers are employees, and with it the internal divisions over the issue between drivers who do and don’t want to be treated like employees. It doesn’t create a new third category, either. The rights would apply no matter their status. That helps unite them on issues like pay and deactivation and against what Uber and Lyft are trying to sell. “This bill is a weapon to fight against Prop 22 coming to Massachusetts,” BIDG’s DeGroot said.

They’ve got their work cut out for them. They’re trying to persuade lawmakers to not support the industry-backed bill, H.1234, while at the same time going without a legislative sponsor for their own. Griffith, BIDG’s executive director, said most drivers she talks to don’t even know that there’s a legislative debate going on. It’s hard to organize drivers who are isolated from one another. BIDG runs ads on Facebook to catch drivers’ attention, and every time she orders food through DoorDash or takes an Uber, Griffith hands the worker her card.

They’ve made strides. In a year and a half, DeGroot said, the group has gone from “a few drivers meeting every now and then at a Starbucks to a real organization that is writing legislation and has a staff.”

The expectation is that none of these bills will pass anytime soon. Uber and Lyft aren’t waiting and have already filed a measure for the November 2022 ballot that’s essentially a Prop 22 clone. While it claims to set a base pay of at least $18 an hour, researchers at the University of California, Berkeley, concluded that, under it, drivers could earn as little as $4.82 an hour because it excludes time spent waiting for passengers or driving back from drop-offs, has a low reimbursement rate for car expenses, and offers a health stipend unlikely to reach most drivers.

Drivers are gearing up for the fight. BIDG is part of the Coalition to Protect Workers’ Rights alongside unions, lawmakers, and organizations like the ACLU. “One thing we have on our side is time and a multi-organizational and multifaceted movement,” Griffith said.

Hamid took part in two strikes in 2019 and 2020. He has twice gone to the statehouse to deliver drivers’ demands to lawmakers. “We’re still fighting,” he said.

***

In some states, app companies have pursued a simple objective: legislation that makes it easy to classify workers as independent contractors without any concessions or extra benefits. One bill that passed in West Virginia declared any worker an independent contractor who signed a contract to that effect. Similar bills cropped up in GeorgiaMissouri, and Oklahoma. Other legislation passed in Utah and introduced in Texas would classify those who work for apps doing a “remote service” as independent contractors.

Another tactic the companies have tried is proposing sectoral bargaining, a way to allow workers to organize without conceding that they’re employees. Such legislation was introduced in New York and Connecticut.

But while sectoral bargaining is seen by many pro-union advocates as a way to give workers in some industries more power, they have warned that this legislation is different. Sectoral bargaining works well where workers are already employees with rights who can bargain from that baseline for more. The New York bill would create a new labor category, “network workers,” who are not employees. “Without employment status, sectoral bargaining really is bargaining for crumbs and not bargaining for power,” said the NELP’s Chen.

In New York, workers would have some victories taken away — eligibility for regular unemployment insurance statewide and compensation for wait time in New York City — and they would have to fight for things like anti-discrimination protection. They would not have the right to strike in the run-up to a collective agreement, one of the most potent tools workers have. The bill essentially requires “workers giving up everything in exchange for not very much,” said Marshall Steinbaum, assistant professor of economics at the University of Utah.

After a draft of that legislation was leaked to Bloomberg in May, experts spoke out against it, and the bill died before the state session wrapped up. But Uber plans to work on bringing back similar legislation in the next session.

California drivers warn against taking the Proposition 22 deal. In exchange for the carve-out they won, app companies promised to offer workers health-care benefits, a minimum-earnings guarantee, and occupational accident insurance. But those haven’t panned out, drivers said. “Lyft and Uber are essentially trying to sell you a bill of goods,” said Sandness of RDU in California. “It doesn’t improve driver conditions, it doesn’t improve pay. This is really about companies protecting their business model.”

Jerome Gage used to pick the days and times to drive for Uber and Lyft in Los Angeles that worked for him. Now, because the base rates are so “pitiful,” he said, he focuses on chasing bonuses, which requires him to drive to specific places and accept certain rides. He used to avoid rush hour; now he’s constantly stuck in it. “They have an enormous amount of power over drivers the way that an employer normally would,” he said. But in California, Uber has legally wiggled out of that kind of relationship.

Gage has also tried to get the benefits that were promised in Prop 22. The base pay is only calculated for the hours he spends with a passenger in his car, neglecting the time he spends between trips, driving back from far away drop-offs, or even sanitizing his car. The company is reimbursing drivers for health insurance, but only for specific plans it chooses and only for those who log enough hours each quarter. One survey found that 86 percent weren’t eligible for the stipend because of their type of insurance; another survey found just 10 percent of drivers are getting it. Gage, who is eligible for Medicaid, switched to the insurance the app companies chose and uploaded his documents, but was declined twice. Even after he got reimbursed it was only for half the cost because he had had to take time off that quarter to recover from getting the Covid vaccine.

“The goal is to provide the drivers and delivery people who don’t already have health insurance a path to access coverage,” said Uber spokesperson Kayla Whaling. She contended that the policy is working as promised, citing a survey the company commissioned that found that while only 14 percent of drivers had signed up for the benefit, about 90 percent already had health insurance. Bird also argued that most Lyft drivers have health insurance from other jobs or sources and thus are not the target of the policy.

California drivers still plan to push for change in their state. “I’m optimistic that the judge’s ruling is the first of many victories in the courts,” Gage said. “Their appeals and legal gymnastics can only last so long.” But Prop 22 will be nearly impossible to eliminate through legislation, requiring a seven-eighths vote in each chamber. So they’re committed to helping fend off similar legislation in other places. “I will gladly spend my time trying to fight them wherever they end up,” Gage said.

They also have their eyes on federal action. Gig companies have been pushing for the creation of a third worker category — neither employee nor independent contractor — enshrined in federal law. The current administration doesn’t seem inclined to go along. In February, the Department of Labor reversed a Trump-era opinion expanding who could be classified as an independent contractor. The Coalition for Workforce Innovation has sued to block the withdrawal.

Democrats have been coalescing behind the PRO Act, which would apply the ABC test to those classified as independent contractors when it comes to the right to form unions and collectively bargain. That’s where RDU in California is mainly focusing its efforts.

Hamid thinks lawmakers aren’t listening to gig workers like him. It’s been two years since he and other drivers first went on strike. But if the bill of rights that he’s pushing for in Massachusetts were to pass, he’d be able to go back to how things were: driving to earn money while going to school. “My dream is just like everybody’s dream,” he said. “I want to get a good job, I want to make enough money to help myself as well as my family.”

 

Bryce Covert is an independent journalist writing about the economy. She is a contributing writer at The Nation, and her writing has appeared in the New York Times, Time Magazine, the Washington Post, New York Magazine, Wired, the New Republic, Slate, and others.

Co-published with New York Magazine.

Save An Endangered Species: Journalists

Bryce Covert is an independent journalist writing about the economy. She is a contributing writer at The Nation, and her writing has appeared in the New York Times, Time Magazine, the Washington Post, New York Magazine, Wired, the New Republic, Slate, and others.

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