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Treat workers as employees? Uber, Lyft and others are scrambling for a compromise

Johana Bhuiyan, Los Angeles Times on

Published in Business News

Faced with a looming threat to their way of doing business, Uber, Lyft and other major on-demand companies are trying something they've historically been reluctant to do: seeking compromise.

Anxious to preserve the freelance work arrangements upon which they've built their vast workforces, these companies have been pushing for a grand bargain that will satisfy labor groups' demands and stave off a California bill that could force them to treat workers in the state as employees -- an outcome that would damage their hopes of long-term profitability.

In recent months, Uber, Lyft, DoorDash, Postmates and other companies have been in discussions with officials at two labor unions -- including local chapters of the Teamsters and Service Employees International Union -- over a possible legislative alternative to California Assembly Bill 5, now working its way through the state Senate. The proposal, details of which are still in flux, would allow the firms to continue to treat workers as independent contractors while providing them some benefits and protections typically reserved for employees. (The California Labor Federation, which represents most of the state's unions, remains committed to obtaining full employee status for on-demand workers.) At least two of the companies, Postmates and DoorDash, have also commissioned surveys to feel out how such a deal would play with Californians.

The longer the discussions drag on, the greater the pressure on the companies to secure a deal. Last week, an SEIU official in New York State criticized a bill that attempts to strike a similar balance wherein gig workers remain contractors but qualify for some benefits. In an op-ed in the New York Daily News, the president of New York's local chapter of SEIU, Hector Figueroa, called the bill a "giveaway to gig companies" that "cherry picks which labor laws to apply to gig workers."

"The Teamsters believe every worker in California deserves to earn a living wage, benefits, and to be able to join together with their co-workers so they can set standards for their jobs," Doug Bloch, political director at the local chapter of the Teamsters union in California, said in a statement.

If it were to become law, AB 5 would codify and give additional legal force to the April 2018 state Supreme Court ruling known as the Dynamex decision, which created a three-part test for companies across industries seeking to classify their workers as independent contractors. Its most stringent requirement is that workers must be treated as employees if they provide a service that's core to a company's business. While Dynamex is now the law, AB 5 would ensure that workers would not have to file suit against companies one by one to make sure it is enforced.

 

Treating their workers as employees would mean the tech companies would have to guarantee a minimum wage and overtime, pay into Social Security and Medicare, and offer unemployment and disability insurance, workers' compensation, sick leave and family leave. They would also have to reimburse workers for mileage and maintenance of their vehicles.

On-demand companies say this legal regime would handicap their ability to recruit workers to keep pace with demand and add significant costs to their bottom line at a time when none of them is yet turning a profit. For Uber alone, the additional cost could be as high as $500 million per year, according to a study by equity research analysts at Barclays.

Echoing their arguments, the California Chamber of Commerce last week asserted that classifying ride-hailing drivers as employees "would undercut the innovation of a business model that has powered economic growth for the state," resulting in less flexibility for drivers and longer wait times for passengers.

Historically, consultation and cooperation have not been preferred ways of doing business in the on-demand sector. From the start, Uber and other on-demand platforms have faced challenges to their legality, from their classification of workers to their liability for accidents to their regulatory status. The default response to such challenges has been to fight back, both in court and in the arena of public opinion. Over the years, they've made various concessions to the demands of workers and customers, but as recently as the beginning of this year Lyft sued New York City to stop it from imposing a minimum wage requirement.

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