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Uber and Lyft face existential threat in California – and they lose



On August 29, Uber and Lyft launched a dramatic, unexpected proposal as a last-ditch effort to derail California legislation that could potentially explode the vehicle industry. In their proposal, the companies promised to pay their drivers $ 21 an hour (but only while on the road), to give them sick leave and to "empower" them to "have a collective voice" – a nod to union drivers.

The proposal "will also protect the driver's ability to operate on his own terms while maintaining the reliable driver experience you will come from," the petition says. Most likely it will fail.

California state senators are ready to vote on Assembly Bill 5, which would make it difficult for so-called giant economy companies to classify workers as independent contractors. If passed, the bill could force Uber and Lyft to identify drivers as employees, a move that the two companies recognize could put them in the queue.

counterparties, "Uber wrote in its S-1

filing with the Securities and Exchange Commission earlier this year.

This is a staggering turn of events: the state that is overseeing the birth of Uber and Lyft and the gig economy they helped create is now struggling to correct some of its worst effects. Drivers have long complained about poor pay, lack of protection and an inability to come together to bring about change. There have been stories of drivers sleeping in their cars because they cannot afford to live in the cities in which they work, struggling to make ends meet and feel completely at the mercy of an impersonal algorithm that dictates their every move. AB5 aims to address these very real problems.

It will also substantially change Uber and Lyft. Uber put it this way: The bill will "drastically change the experience of the shared journey as you know it, and limit Uber's ability to connect you to the reliable rides you expect."

If this sounds like a horrible prediction, it is understood as such. Uber and Lyft face an existential threat in AB5. And they lose.

Companies sent their expensive lobbying teams to Sacramento to convince Gov. Gavin Newsham and lawmakers that AB5 would ruin their ability to do business in the state. But now "everyone but accepted that AB 5 will pass and the manager will sign it," according to Los Angeles Times .

This has been cooking for over a year now. In May 2018, the California Supreme Court ruled in favor of workers for a document delivery company called Dynamex Operations West; these workers sought employment status. The drivers of the delivery service first brought the case more than a decade ago, arguing that they were required to wear the company's uniform and display its logo while providing their own vehicles and bear all costs associated with delivery. AB5 aims to codify the Dynamex Dynamex decision in law. And that's what Uber and Lyft feel like pinching.

"They clearly know that they are in a difficult place", MEP Lorena Gonzalez (D-San Diego), co-author of AB5, told The Verge . "They violate Dynamex as it is. They know AB5 is coming. "

Gonzalez said he wanted to stop the misclassification of workers. Her bill will require companies to use a legal standard called the "ABC test" in determining employment status:

A): The employee is "free from the controls and guidance" of the company that hired them while performing the job your.

(B): The worker performs work that falls “outside the normal course or type of activity of the tenant.”

(C): The worker has his own independent business or trade outside the work for which he was

Gonzalez warned against any last-minute attempts by Uber and Lyft to come up with their own solutions to the problems. "These companies have been around for years. And they know that their drivers have these complaints and these problems and have done nothing to deal with them. And many times they said they would address it, but they didn't. ”

The California business is in full panic over the bill. The state chamber of commerce and other business groups are lobbying for change and are calling on lawmakers to consider a long list of exceptions.

As such, AB5 releases a long list of professions, mainly those in which practitioners set their own courses. These include building contractors, business-to-business services, freelance writers, fine artists, grantmakers, graphic designers and podiatrists. Research also includes doctors, dentists, lawyers, architects, accountants, engineers, insurance agents, investment advisers, direct sellers, real estate agents, hairdressers, barbers, estheticians and electrologists.

But most of the attention is on Uber and Lyft. After all, it is hard to ignore the tale of startup companies that have made billions using weak labor protections, only to be taken down by the galvanized labor movement. The bill is being pushed by major unions, including SEIU, Teamsters, the United Food and Commerce Workers and the California Federation of Labor, which represents 2.1 million workers.

AB5 also became a bell for the 2020 presidential race. Several top Democratic candidates, including Senators Elizabeth Warren (D-MA), Kamala Harris (D-CA) and Bernie Sanders (I-VT), and the mayor of South Bend Pete Butigig, approved the bill. Butigig spoke at a rally in support of AB5 last week.

The bill was passed by the Senate Committee on Budgets last week. It will now head to the full Senate floor, probably in September. Newsom, which has strong alliances with both the labor and technology sectors and technology companies, urges the two sides to negotiate a deal.

Uber and Lyft can see the writing on the wall – and companies are already planning their next move, According to LA Times ride companies say they will spend $ 60 million to fund the newsletter for vote in 2020 to create a new driver classification. Food delivery service DoorDash, another economic concert company that classifies its couriers as freelancers, says it will raise $ 30 million. Uber and Lyft also support a separate bill to create a new designation for those working in the gig economy, but consider the ballot initiative to be a "last resort," according to Times .

This desperate maneuver contrasts with the rude attitude of Uber CEO Dara Khosrovshahi, who asked about AB5 in a earnings call earlier this month. "If AB5 passes, it will simply be a qualification of the existing law. This does not immediately turn drivers into employees, "he said.

Investors take the same position." The immediate impact on Uber / Lyft will be more limited than they currently fear, "Wedbush analyst Daniel Ives says in a note. He states that the bill is so transformational that "its implementation and implementation will be challenging, likely to delay immediate impact."

Part of the problem is with President Donald Trump and his National Council appointees. Earlier this year, a federal Labor lawyer in the Trump administration argued that city race drivers were independent contractors, not employees.

The Labor Department also said concert workers as drivers of Uber is a contractor who does not meet the minimum wage and overtime requirements, a federal judge ruled last year in what is said to be the first classification of Uber drivers under federal law. This means that even if AB5 goes through the law, unions seeking to organize drivers will face high winds. Uber and Lyft may force organizing drivers to vote against Trump-controlled National Labor Council, which may undermine those efforts.

This has been going on for years. Hundreds of Uber drivers went on strike ahead of the company's expected IPO in May. Drivers say they want better working conditions and more transparency from Uber in terms of pay and access to the platform. Uber's stock price has been steadily declining since the IPO amid concerns about the company's lack of profitability; In the second quarter of 2019, Uber lost a staggering $ 5.2 billion, most of which were due to one-off share repayments.

There are some working groups that represent drivers, but they all lack the ability to collectively deal with companies on material issues such as payroll, hours and workers' compensation scales . This could seriously hamper the most widely anticipated effects of the law: an authorized class of drivers, forcing Uber and Lyft to come to the table to reach a collective agreement.

Still, the passage of AB5 in California could have a domino effect that inspires other states to codify their own ABC misclassification tests, said Shannon Lis-Riordan, a lawyer who represented thousands of drivers in class action lawsuits Uber. But it will face strong opposition from Uber and Lyft, which have deep pockets for spending on lobbying and public relations campaigns.

"They will continue to pour money into their misinformation campaign to convince voters that their refusal to protect employment helps workers," said Lys-Riordan, who is now running for the U.S. Senate in Massachusetts. " What it does is allow them to pass on all the costs and burdens of self-employment to the workers whose work made these companies the way they are today. "

Uber and Lyft have long argued that drivers do not want to be classified. as employees, preferring flexibility to define "Our drivers are constantly telling us that the reason they value Uber is because they value their freedom," Hosrovshahi said of the profit. " they run their own business. "

But Lees-Riordan claims that is not true. Uber and Lyft are trying to fool their workers into thinking they will have to give up their flexibility if they are to gain employment protection, she said. "Representing thousands of concert workers over the last six plus years, I know it's a lie."

Michael Reich, professor of economics and co-chair of the Center for Wage and Employment Dynamics at UC Berkeley, agrees. that if California drivers are reclassified as employees, their employers could provide them with improved salaries and benefits and a full reimbursement for driving costs, allowing drivers to organize themselves while maintaining the flexibility of water goggles during working hours. "Nothing in federal or state law precludes allowing employees to choose different or similar blocks of work each week," Reich told The Verge .

Uber and Lyft describe driving as a "side gig" – and for many drivers, it certainly starts that way. This was for Edan Alva, who started riding for Lyft eight years ago to help make ends meet. But after losing his main job, driving became his main source of income. And then he knew about the inequalities in the system.

"I found it difficult to exist in the Bay Area," says Alva The Verge . "It's become an existential struggle to make enough money to end the week, end the month."

He said, without considering the cost, he earns about $ 15- $ 20 an hour driving for Lyft, but after paying for gas, insurance and car maintenance, which dropped to $ 4 an hour. Alva was one of hundreds of drivers who have traveled to Sacramento in recent months to lobby for AB5. He believes that Uber and Lyft cannot be trusted to do the right thing by drivers, despite requests to the contrary.

"If a company cannot maintain profits and pay its labor fairly," he said, "then that company shouldn't exist. “


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