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Although a more comprehensive evaluation of the impact of AB 5 is yet to come, the legislation by no means achieved its goals. AB 5’s proponents and critics cite different reasons for its failure.

Even before the passage of AB 5, there was much confusion amongst workers and employers as to who would still qualify as independent contractors under the ABC Test. A former aide for Assemblywoman Gonzalez reported that the staff was all-hands-on-deck, taking meetings and reporting back on information and concerns they received from workers and their employment models because of the confusion and anxiety from the independent contracting field.

Since the bill’s passage, the legislature has specifically exempted about 100 professions from AB 5, some permanently and some only temporarily. For those workers and employers who were unable to obtain legislative exemptions, there is a perception that AB 5 produces two tiers of employers: those that have the political power to receive an exemption and those that do not.

For those workers and employers who were unable to obtain legislative exemptions, there is a perception that AB 5 produces two tiers of employers: those that have the political power to receive an exemption and those that do not.

For those without exemptions, legal status, responsibilities, and potential liabilities are uncertain. Assemblywoman Gonzalez’s former aide recalled that the office was similarly swamped with meetings after the AB 5’s passage, addressing the confusion from Californians on issues ranging from the wedding to landscaping industries. For example, many employers stopped hiring independent contractors from California altogether. Even Vox Media eliminated hundreds of freelance writing and editing roles in California. The former aide explains that this was an exaggerated response out of caution and that most of those workers would still be considered independent contractors under the new standard.

However, these employers and workers could neither get clarification from the California Labor & Workforce Development Agency nor from the assemblywoman’s office. The assemblywoman’s former aide noticed that many of the constituents calling their office did so because the agencies lacked sufficient resources to respond. She also noted that their office could only walk someone through the ABC Test and was unable to provide any definitive answers since they could not provide legal advice on how an agency or a court would decide.

The assemblymember’s former aide expressed resignation to the limitations of the legislative process and bureaucracy. She recognized the inadequacy of the resources and guidance that the agencies and the office could provide. Because the office felt time-pressed from the deadlines of the legislative session, she explained that “[S]omething is better than nothing,” and the assemblymember and the staff did their best to be responsive to concerns afterward.

There was also confusion surrounding which laws and regulations were impacted by AB 5. The law determines applicability under the California Labor Code and Unemployment Insurance Code, which determines applicability for minimum wage, overtime pay, meal and rest breaks, paid sick days and paid family leave, reimbursement of business expenses, commission payment rules, discrimination and sexual harassment protections, disability, unemployment, and workers’ compensation under California state law. Applicability under federal statutes and regulations is determined under their own employee-independent contractor tests.

Lydia, a driver active in campaigning against AB 5, shared that many drivers–herself included–viewed AB 5 as being written and pushed through by the unions and was “not about workers’ rights.” Although some may argue that AB 5 was part of a larger movement to change how independent contractors are defined nationally, AB 5 does not impact the right to unionize. In other words, workers that are employees under AB 5 do not necessarily have the right to organize, which is governed by the National Labor Relations Board’s own classification test. Similarly, AB 5 does not change federal tax contributions and withholding, which is governed by the Internal Revenue Service’s own test.

AB 5 injected unsettling instability into an already precarious independent contracting system without any means to reach a new equilibrium. The disproportionate impact fell on those without the means to obtain definitive answers through legislative exemptions or legal advice.

For gig companies, there was no confusion around the applicability of AB 5–they simply disregarded it. Although they made small changes, such as allowing drivers to set a fare higher than the standard fare, Uber and Lyft continued to treat their drivers as independent contractors. Because gig companies operate on a too-big-to-fail mentality, people doubt whether labor laws could ever touch big companies who decide to resist them. Gig companies not only resisted but also used the uncertainty of the Covid-19 pandemic as a tool in the process.

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After the California Attorney General and a coalition of California city attorneys as well as the California Labor Commissioner filed suit against Uber and Lyft for misclassifying drivers under the ABC Test, DoorDash, Lyft, and Uber each contributed $30 million to campaign accounts to fund a ballot initiative if the state legislature refused to provide them with an exemption. This turned out to be Proposition 22 (Prop 22), which defined rideshare and delivery drivers as independent contractors and exempted them from AB 5’s ABC Test.

In a state that is known to vote down ballot initiatives in favor of the status quo, California voters supported Prop 22 by more than a 17-point margin, with nearly 59 percent of the votes. A survey funded by Uber found that 82 percent of Uber and Uber Eats drivers were happy about the passage of Prop 22. The survey also found that more than half of the drivers surveyed believe that they would be worse off if Prop 22 did not pass. In fact, 84 percent of drivers reportedly preferred being independent contractors.

Even if the survey exaggerated the support for remaining independent contractors and Prop 22, a large constituency of drivers want to be independent contractors. In a survey by the Rideshare Guy, 60 percent of the California drivers they surveyed supported Prop 22, and nearly 69 percent preferred to be an independent contractor. In contrast, only 11.5 percent of the surveyed drivers in California wanted to be an employee.

The Yes on Prop 22 spent nearly $205 million to exempt app-based transportation (rideshare) and delivery drivers as independent contractors. In comparison, the opposition campaign spent under $19 million. The Yes campaign was the most expensive ballot measure in California history. For scale, Propositions 94, 95, 96, and 97 came in second, collectively spending $154.5 million in 2018. The top five donors to the Yes campaign were Uber donating $59.5 million, DoorDash donating $52 million, Lyft donating almost $49 million, InstaCart donating $31.6 million, and Postmates donating $13.3 million.

The Yes campaign flooded every communication channel with messages of job loss and price hikes. In a since-deleted blog post, Uber CEO Dara Khosrowshahi claimed that, if the company was forced to make drivers employees, it would only be able to support 260,000 jobs, as compared to the 1.2 million drivers the company had before the pandemic. This was combined with threats from both Uber and Lyft of leaving California altogether.

To customers, the Yes campaign sold the story that what was good for the wallet was good for society. In the app, in emails, and bundled with 99¢ Whoppers, the gig companies sold customers that preserving a cheap and pandemic-essential service would also “[s]ave hundreds of thousands of Californians from losing work,” “provide new benefits and protections to drivers,” and save Californians from drunk driving. Fake progressive-sounding organizations–such as “Feel the Bern, Progressive Voter Guide,” “Council of Concerned Women Voters Guide,” and “Our Voice, Latino Voter Guide”–sent out political flyers urging voters to support Joe Biden and Kamala Harris, a number of other Democratic candidates and ballot initiatives, and Prop 22.

To customers, the Yes campaign sold the story that what was good for the wallet was good for society. In the app, in emails, and bundled with 99¢ Whoppers, the gig companies sold customers that preserving a cheap and pandemic-essential service would also “[s]ave hundreds of thousands of Californians from losing work,” “provide new benefits and protections to drivers,” and save Californians from drunk driving.

Fake progressive-sounding organizations–such as “Feel the Bern, Progressive Voter Guide,” “Council of Concerned Women Voters Guide,” and “Our Voice, Latino Voter Guide”–sent out political flyers urging voters to support Joe Biden and Kamala Harris, a number of other Democratic candidates and ballot initiatives, and Prop 22.

Although it was already difficult to exist in California without feeling some of the $200 million in messaging, the companies even more aggressively targeted their drivers. Before starting a shift, drivers were prompted by a pop-up that stated “Prop 22 is progress.” Drivers were required to either select the highlighted “YES ON PROP 22” or the de-emphasized “OK” to begin driving. Because of the amount of Prop 22 pop-ups that were pushed on the app throughout the day, drivers reported feeling as if they had to click “YES ON PROP 22.” One driver estimated that this occurred 25 to 30 times per day. Another said it happened every single time a person requested a ride.

Companies went further and asked drivers to promote Prop 22 to customers. For example, Instacart asked workers to put Prop 22 stickers in customers’ orders, and DoorDash provided Prop 22 delivery bags. Drivers were even asked to record pro-Prop 22 messages and reported fear that the companies would be aware if they did not.

But their message was clear: “If Prop 22 doesn’t pass, there’s a really high likelihood that all of that flexibility will be gone, the ability to work across platforms will be lost and hundreds of thousands of jobs will be lost.”

“If Prop 22 doesn’t pass, there’s a really high likelihood that all of that flexibility will be gone, the ability to work across platforms will be lost and hundreds of thousands of jobs will be lost.”

However dramatized these threats were, they struck a chord with drivers–for an important reason.

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Steve spent his entire career at a carpet cleaning company. The pay was not great, but he had job security. It afforded Steve and his family a modest lifestyle in California’s Bay Area, which houses three of the most expensive housing markets in the country. Not many jobs in the area offered the same to high school dropouts. For that reason, Steve considered himself lucky, and he never considered a Plan B.

Around 2010, Steve started experiencing sharp pains in his back. Similar to many of his colleagues, he proudly hauled heavy machinery and carried on with his work, just as he did when did not have pain. His condition progressively and quickly worsened. Several failed surgeries later, he was unable to work as he did without his injuries.

“The doctor basically said to me, ‘Get another job or you’ll be crippled by the time you’re 60-65.’”

“The doctor basically said to me, ‘Get another job or you’ll be crippled by the time you’re 60-65.’”

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For 25 years, Kevin had been a unionized carpenter in Northern California. Being a union worker was who he was, and it ran through his veins:

“My old man was a union painter… my wife is a fourth generation Longshoreman. There was no me not being in the union, period.”

Similar to Steve, Kevin never considered doing anything else. The union paid “pretty dang good money.” He even “used to make fun of Walmart workers.” That was until the Recession and he lost his job.

“And then I couldn’t find a job anywhere, doing anything. I went back to school, I got my construction management degree… It was like alright, let’s move it up. Nothing. Still isn’t any [work].”

For a brief period, Kevin worked as an independent truck driver. He bought a truck and drove all across the country, sometimes taking home only $100 after expenses, “just enough to justify being away from his wife and young daughter for long periods of time.”

A friend told Kevin about Lyft, and it felt like a godsend. After researching the new company and calculating the expected take-home pay based on Lyft’s advertised wages, Kevin and his wife felt optimistic and sold his truck.

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Some drivers drive for the same reasons as Steve: Rideshare driving is the best option available.

“Signing up to drive with Uber is easy,” according to Uber’s Guide to Driving and Delivering. On the other hand, Lyft does not outright say that becoming a driver is “easy,” but it does indicate to potential drivers that not having a car, insurance, and so on are not obstacles to becoming a driver. Becoming a driver was even easier nearly a decade ago when Uber and Lyft were first founded: no background checks, vehicle specifications, or special insurance coverage were required. Rideshare was meant to be accessible.

Becoming a driver was even easier nearly a decade ago when Uber and Lyft were first founded: no background checks, vehicle specifications, or special insurance coverage were required. Rideshare was meant to be accessible.

Unlike traditional taxi drivers, no training or skills were required. There were no educational barriers or even language barriers. And the promised wages were much higher than any other comparable opportunity. This made driving a prime opportunity for low-income workers, and immigrants in particular. A survey by UC Santa Cruz’s Institute for Social Transformation found that 78 percent of gig workers in San Francisco are people of color, and 56 percent are immigrants.

The $74,000 Uber estimated that drivers made in 2014 was far more appealing than the $63,000 per year for an immigrant household, as estimated by the Pew Research Center. Because many communities of color and immigrant populations lack the financial reserves, the immediate earning potential can be a weightier factor in determining which industries to enter.

Not only can drivers unlock an income source without many requirements, but drivers can also now receive their pay daily. An article published by the World Economic Forum explains that the frequency of pay and better wages are two sides of the same coin–both playing an important role in increasing the financial independence of workers. Workers trying to make ends meet not only need wages to cover their expenses, but they also need access to their own earned income when the bills are due. Workers turn to payday loans, overdraft fees, and credit card debt to get through the pay cycle, costing $9 billion in payday loan interest, $15 billion in overdraft fees, and $931 billion in credit card debt annually.

The frequency of pay also serves an important role in feeling financially secure. Researchers from Stanford and USC found that increasing pay frequency increased perceptions of wealth. In other words, with similar financial resources, how adequate the resources feel depends on how often someone is getting paid. The researchers still found an impact of increased subjective wealth from the increased frequency of pay even when the account balances were lower.

Not only does the Rideshare pay model fit into this model perfectly, the wages deposited–and available to the worker–do not include taxes and expenses. As a result, both the frequency of pay and the inflated amount of pay leads to a worker’s feeling that they have more financial resources and are making more money.

Lastly, cited as the major motivation behind joining the gig economy, flexibility plays a crucial role in financial security and factors into a worker’s sense of agency and ability to balance personal responsibilities. “The gig, in effect, was the lifeline and the lifeline was insufficient,” explains Ginia Bellafante for the New York Times. In other words, drivers depend on the flexibility–or the ability to work as many extra hours as possible–to make ends meet. If there was an unexpected expense, if their other work was not paying enough, or if Uber or Lyft cut their driver pay, drivers drove more.

Uber has recognized that flexibility is so important to its drivers that its biggest critique of studies estimating driver net profits (or sometimes net losses) was that the figures did not incorporate the value of flexibility, and thus were misleading. While it can allow drivers to pursue their dreams (like Peter who is an artist), many depend on flexibility to meet their other responsibilities. Low-wage work is known to offer the least flexibility and cannot provide the ability to adjust to childcare arrangements or even to spend time with family. Since even some parents choose not to work because childcare is unaffordable, being able to drop children off at school or only needing one daycare shift instead of two can be crucial to afford to work.

A perfect storm–these threats of job loss and inflexible work came during the peak of the pandemic when many people all over the country had lost their jobs and many others were struggling to balance children struggling with online learning and working from makeshift home offices. It was unclear what the future would hold with no federal stimulus package, uncertain state unemployment benefits, or vaccine in sight. For many workers, gig work was their ability to weather the storm.

It was unclear what the future would hold with no federal stimulus package, uncertain state unemployment benefits, or vaccine in sight. For many workers, gig work was their ability to weather the storm.

AB 5 was aimed at worker misclassification within the gig economy. But by capitalizing on the safety net that gig work provides, app-based rideshare and delivery companies bought themselves an exemption from having to provide labor protections. Not only did app-based delivery companies buy an exclusion from a law that was designed for them, but the rest of the gig economy also remains under the ABC Test, even though there is no meaningful difference between their respective workers.

Additionally, nothing prevents companies from continuing to provide flexibility that drivers want and depend on if drivers were employees: there are no laws that require Uber and Lyft to have stringent restrictions on loyalty to one employer or shifts that employees must work. ‘

Classifying drivers as employees similarly does not require companies to make such dramatic shifts that would force companies to fire 80 percent of their workers. Uber claims that the company would have to rigidly schedule its drivers–and would not allow drivers to work more or less–as a result of “issues… matching supply and demand–making sure there are enough drivers when demand is there.” But that is not the only way to meet supply and demand.

Some have even claimed that the gig economy’s flexibility is a “myth”: “The app-based companies have taken insecure work and dressed it up through a myth of ‘flexibility,’” says Brian Chen, a lawyer for the National Employment Law Project. This flexibility also comes with inherent limitations since profitability often requires driving during specfic times.

“The app-based companies have taken insecure work and dressed it up through a myth of ‘flexibility.’”

Flexibility has two sides–one of which involves instability and a lack of benefits and protection and the other helping workers balance work with personal life–and drivers are taking the hit for the small upside that they really need. Companies can meet the need to balance work with personal lives and accommodate a desire for more autonomy while treating their workers as employees. In that way, the work would provide an actual safety net, instead of an improvised and unreliable lifeline.

Gig companies may actually be in a better financial position than before Prop 22. Uber shares increased by 14.59 percent, a new 52-week high, and Lyft shares close up 11.28 percent after the passage of Prop 22. Additionally, although Prop 22 provides drivers additional benefits, some drivers report seeing little to no net benefits, since many drivers were already making 120 percent of the minimum wage plus $0.30 per mile before expenses were taken into account. Additionally, drivers can be disqualified from the healthcare subsidy for various reasons, such as being a beneficiary under someone else’s policy.

A UC Berkeley study found that Uber and Lyft have the resources to pay drivers more without increasing fares. Nevertheless, companies are passing on the “costs” of Prop 22 onto the riders by adding additional fees. Grubhub even lowered the default tip amounts (up to $1.50), and drivers felt the impact of decreased earnings.

Under the guise of flexibility and providing more benefits to drivers, app-based delivery companies were able to buy themselves an exemption from providing meaningful protection, security, and benefits for their workers. Prop 22 was not for the workers–it provided minimal benefits to workers–but was money well spent for the companies.

Under the guise of flexibility and providing more benefits to drivers, app-based delivery companies were able to buy themselves an exemption from providing meaningful protection, security, and benefits for their workers. Prop 22 was not for the workers–it provided minimal benefits to workers–but was money well spent for the companies.

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Kevin filed an official objection to Cotter v. Lyft’s proposed settlement, a major wage and hour class action suit.

“Oh, I don’t want to be an employee.”

Kevin shares that he wants many of the benefits associated with being an employee, but he wanted the true “freedom and flexibility” associated with being an independent contractor, as compared to the restricted flexibility he experiences now. This hope of gaining “freedom and flexibility” seemed to come from his fear of being at the mercy and firing power of a company.

“7 in 10 [independent contractors] and 3 in 10 traditional employees say independent work is more secure than traditional employment.”

Carolyn Ockels, Steve King, and Gene Zaino report in the Harvard Business Review that the trend of increasing belief in the security of independent work and the decreasing belief in the security of traditional employment reflect many factors, a major one being the declining security of payroll jobs. A key reason why workers choose employment over independent work is job security. However, companies lay off workers even when times are good–all bets are off when times are bad. With job insecurity, companies offer stagnated wages, fewer benefits, and extended hours.

Although disguised as a helping hand during times of crisis, the gig economy has capitalized on every economic downturn, continuous layoffs, and wage stagnation to build its fleet of workers. But the gig economy itself is only a symptom of the problem.  Workers have come to rely on the gig economy in part or in full because other sources of income are insufficient. The gig economy is a “lifeline” for workers because neither employers nor the government is a safe bet for workers anymore.

Although disguised as a helping hand during times of crisis, the gig economy has capitalized on every economic downturn, continuous layoffs, and wage stagnation to build its fleet of workers. But the gig economy itself is only a symptom of the problem.

Neither Yes on Prop 22 nor No on Prop 22 achieves justice for workers.

Forty-four percent of the labor force earns low wages. As either employees or independent contractors, in many areas, these wages are insufficient to live. Federal and state governments must reevaluate their New Deal-era (or slightly more recent) protections for workers and ensure they are actually serving their goals. Just as importantly, governments and society must make it known that companies cannot build an unsustainable business model, claim their hands are tied, and pass on the costs of their profits to their workers, customers, and taxpayers.

Uber said that if Prop 22 did not pass, it would have to temporarily discontinue operations in California to determine how to relaunch in the state. Of course, companies should not leave their workers in limbo for an indefinite amount of time without being provided for–they should take time to reconsider how they operate.

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Hello Alfred is a resident management software application which enables property managers to provide in-home services and experiences to residents. Although offering Uber-style on-demand services, all of its workers are W-2 employees and have a starting wage of $16. CEO Marcela Sapone recognizes that a sustainable model can come at the cost of rapid growth, but it does not require sacrificing profitability. It is a false dichotomy:

“All of the current 1099 platform businesses can be change agents by coming to the table to figure out how to balance the need for great jobs with a business model that performs well on Wall Street… I think there’s a really sustainable business model within Uber…”

The changing landscape of the labor force and job can feel like a turbulent transition, but it is our opportunity to reevaluate the vestiges of twentieth-century work that no longer serve a purpose, challenge the false choice between workers and profitability, reevaluate the needs of workers, and establish a true public safety net.

From The [F]law:

• Julio Colby, Brave New Work: The Resurgence of Organized Labor in the U.S..

 

From The Systemic Justice Journal:

• Breanne Parker, Fast Fashion, Consumer Complicity, & Corporate Accountability.
• Nicole Franklin, What Happened to Weekends? Analyzing the erosion of wages and its consequent increase in the number of hours Americans work.