Uber Technologies Inc and Lyft Inc have won a major victory in their battle to continue classifying drivers as contractors, not employees, following the passage of a ballot measure that exempts them from a California labor law.
Voters in California on Tuesday passed Proposition 22, the most expensive ballot-measure campaign in state history, which came to symbolize a bitter struggle over the future of the gig economy.
About 58 percent of ballots were cast in favor, following one of the hardest fought — and most expensive — proposition battles in the state’s history.
Photo: AFP
The measure was backed by some of Silicon Valley’s most powerful tech companies, including Uber, Lyft, Instacart Inc and DoorDash Inc, which spent upwards of US$200 million on the efforts.
The companies claimed that AB5, a labor law passed last year that changes the way companies classify employees, would drastically change how they do business and even threatened to pull out of California after a court order to comply with AB5 in August.
Drivers and labor groups were opposed to Prop 22, saying that it would allow firms to sidestep their obligations to provide benefits and standard minimum wages to their workers even as they make billions.
The Yes on Prop 22 campaign declared victory late on Tuesday, calling it “a win for drivers across California.”
After the passage of Prop 22, workers at gig economy firms would continue to be classified as contractors, without access to employee rights such as minimum wage, unemployment benefits and health insurance.
Prop 22 would carve out an exception for some driving and delivery apps from AB5.
Uber and Lyft previously said that their drivers were contractors and by classifying them as such they were in accordance with AB5.
The law disagreed, as the state attorney general and two different courts ordered Uber to comply with AB5.
When Lyft went public last year, it was valued at US$22 billion and had 1.9 million drivers working through its app.
Uber was valued at US$82 billion ahead of its initial public offering in May last year and had 3.9 million drivers.
The companies fought tooth and nail to save their business model from the legislation, spending millions of dollars to plaster California with advertisements in support of the ballot measure for the past several months.
The passage of Proposition 22 in the home state of many of the gig economy companies is likely to be seen as an example for tech legislation around the US.
Under Prop 22, Uber and Lyft have conceded to supply workers with some forms of benefits, although the protections would not be as extensive as they would have under AB5.
Drivers would now get vouchers to access subsidized health insurance and guaranteed hourly earnings. The companies would also implement new safety measures, including more frequent background checks of drivers.
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