Uber, Lyft win California bid to keep drivers as contractors

Los Angeles

VOTERS in trend-setting California backed a ballot proposal by Uber and its allies that cements app-based food delivery and ride-hail drivers' status as independent contractors, not employees, according to a projection by data provider Edison Research.

Victory in the most expensive ballot contest in state history is a rebuke to state legislators and allows Uber, Lyft and allies to set the employment terms of the gig economy that they helped create. Some had threatened to leave California, their home market, if they lost.

The measure, known as Proposition 22, marked the culmination of years of legal and legislative wrangling over a business model that introduced millions of people to the convenience of ordering food or a ride with the push of a button.

Companies described the contest as a matter of ensuring flexibility for a new generation of workers who want to choose when and how they work. Opponents saw it as an effort to exploit workers and avoid employee-related costs that could amount to more than US$392 million each for Uber Technologies Inc and Lyft Inc, a Reuters calculation showed.

Uber, Lyft, DoorDash, Instacart and Postmates, some of whom threatened to shut down in California if they lost, poured more than US$205 million into the campaign.

After Edison made the projection, state figures showed the measure ahead 58 per cent to 42 per cent with two-thirds of precincts at least partially reporting. The results are incomplete and must also be certified.

"I'm so, so happy. I know it's right for the drivers, and I know it's right for the people who use the services," said retiree Jan Krueger, 62, who drives part-time for Lyft in Sacramento and got a "Mom Lyft" tattoo on her shoulder.

The proposition was the app makers' response to a new California law that requires companies that control how workers do their jobs to classify those workers as employees.

The app companies argued that California's law did not apply to them because they are technology platforms, not hiring entities, and that their drivers control how they work.

Companies warned they could cut 80 per cent of drivers, double prices and even leave California, if they were forced to pay benefits including minimum wage, unemployment insurance, health care and workers' compensation.

Uber, Lyft, DoorDash, Instacart and Postmates challenged the new law in court, but judges so far have ruled against them.

Uber and Lyft recently lost an appeal, which would have narrowed their options if Prop 22 failed.

California represents 9 per cent, roughly US$1.63 billion, of Uber's 2019 global rides and food delivery gross bookings, and some 16 per cent of Lyft's total rides.

Prop 22 leaves gig workers as contractors and provides them more modest benefits than are required under state law, including minimum pay while riders are in their cars, healthcare subsidies and accident insurance.

Not all drivers favour the contractor model. Los Angeles Uber driver Christine Tringali said the companies' actions were shameful.

"How can someone fight so hard to avoid paying people a living wage and giving them job security?" Ms Tringali said ahead of the vote.

The California battle was just one of many around the world.

US states such as Massachusetts and New York are challenging gig companies' labour policies. The European Union's highest court in 2017 held that Uber is a transport service to be regulated like taxi companies, not a technology platform that connects riders with drivers - opening the door for challenges there. REUTERS