OAKLAND — Uber CEO Dara Khosrowshahi said Thursday that his tech coalition’s ballot win in California this week should serve as a template for regulating the gig economy in other states and nations.
Uber and other companies that dispatch workers by apps achieved a landmark win in America’s most populous state on Tuesday, when voters overwhelmingly passed their Proposition 22 to shield companies from having to classify their workers as employees. The companies spent more than $200 million to convince California voters.
Khosrowshahi emphasized in an investor call that the outcome will likely reverberate beyond Uber’s home state of California.
“Going forward, you will see us more loudly advocate for new laws like Prop 22, which we believe strike the balance between preserving the flexibility that drivers value so much, while adding protections that all gig workers deserve,” Khosrowshahi said, adding that “it’s a priority for us to work with governments across the U.S. and the world to make this a reality.”
Once Proposition 22 is certified, Uber drivers and others will remain independent contractors while drawing a minimum level of pay and benefits, like some employer health care provisions. Still, that compensation is less than what the companies would have had to provide workers under a new California law that took effect earlier this year.
The proposal was fiercely opposed by labor unions and labor-aligned Democratic leaders, though Gov. Gavin Newsom noticeably declined to take sides, even when pressed in the election’s final days. The governor has long held out hope for a deal between tech and labor, and in remaining neutral he signaled he would like negotiations to continue.
Courts were poised to force gig companies to treat drivers as full-time employees, and the companies threatened to stop doing business in the car-dependent state.
But Tuesday’s outcome has suddenly buoyed gig companies. Uber’s stock price has soared 17 percent since voters approved Prop. 22.
Why it matters: Winning Proposition 22 was vital for tech companies looking to shield their contractor-reliant business models in California. But as Khosrowshahi indicated, it was also about drawing a line in the sand and creating a precedent for labor struggles around the country.
Context: Tech companies shattered spending records by pouring more than $200 million into passing Prop 22 and sidestepping Assembly Bill 5, the new law cementing a California Supreme Court ruling that compels employers to treat more workers as employees rather than contractors.
The battle over AB 5 and the subsequent Prop 22 campaign functioned as a proxy fight in a larger, ongoing struggle over the nature of work. Organized labor and Democratic allies saw the law as a critical backstop for stable jobs, accusing tech companies of accelerating an exploitative shift from employment to contracting.
Reflecting the high stakes, the fight rippled beyond California. Democratic presidential candidates weighed in on AB 5, including Democratic presidential candidate Joe Biden, who could soon change the national dynamic with a White House win.
House Democrats passed a labor bill, the PRO Act, that would have enshrined an AB 5-like test on the national level. Republicans turned AB 5 into a campaign issue, lambasting Democrats over job losses to workers whom they said prefer job flexibility in lieu of benefits.
After California Attorney General Xavier Becerra won a court ruling compelling Uber and Lyft to reclassify their workers, the companies threatened to suspend their operations in California. They backed down after winning an eleventh-hour reprieve, but the standoff attracted national attention, with Republicans in Congress calling the episode an example of Democratic overreach.
What happens next? Khosrowshahi and other tech executives have long advocated for an employment model that straddles the employee-contractor dichotomy by letting workers set their own hours but offering them portable benefits. They have also advocated for a form of collective bargaining known as sectoral bargaining, which differs from unionization for employees.
After Prop. 22’s resounding victory, look for the tech industry to redouble its push — both in legislatures and in Congress — for that hybrid model. Elected officials in blue states like New York who were mulling California-like pushes may back off after witnessing the industry’s power.
Lyft officials have had a similar approach to Khosrowshahi, saying in multiple interviews since Prop. 22 passed that they are hoping to forge a durable labor compromise.
“Prop. 22 settled the question of driver independence, but we know there is more work to be done,” Lyft President John Zimmer told the San Francisco Chronicle.