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The Gig Economy v. Assembly Bill 5

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Uber, Lyft, Postmark and others have raised over $110 million dollars and about the same amount in signatures to override the AB5 Bill by way of a ballot initiative to California voters.

San Jose, CAWhen the Assembly Bill 5 (AB 5) was signed in September 2019, Uber and Lyft said they'd sponsor a ballot initiative to take the issue to California voters in November 2020. To date, over $110 million has been raised and more than a million signatures collected to sponsor the initiative known as the "Protect App-Based Drivers and Services Act", which could exempt some companies from AB5 written into the California labor law. Labor and employment lawyer Michael Warren with the McManis Faulkner law firm says Uber and others will need more than money and signatures.

“Send lawyers, guns and money” – Warren Zevon.

  Well, not guns. Along with the food delivery company DoorDash, Uber and Lyft pooled together $30 million. Instacart and Postmates have also added $10 million each, bringing the total raised to $110 million. To get on the November ballot, the proposal needs to collect more than 623,000 signatures. A spokeswoman for the initiative announced on February 26 that it hit one million signatures. But that doesn’t necessarily mean that California voters will see the initiative on the ballot when they head to polling stations in November. 

Despite having more than the required signatures, “It's still unclear whether the initiative will make it onto the ballot or if it will pass,” says Michael Warren, who points out that signatures is just one part of the process. “There is a process for validating the signatures and qualifying the initiative for the ballot. Sometimes legal questions or challenges arise that result in litigation before the initiative appears on the ballot.”

Attorney Michael Warren
Attorney Michael Warren of McManis Faulkner

Olson v. California

Let’s go back to last December, when Uber and Postmates, along with two people, Lydia Olson and Miguel Perez, filed a claim declaring AB5 unconstitutional and unenforceable. They argued that AB5 is "an irrational and unconstitutional statute designed to target and stifle workers and companies in the on-demand economy,” according to court documents. The plaintiffs asked for an injunction on AB5, pending the court’s final judgment, but Judge Dolly Gee in February 2020 rejected their request.

This reporter asked attorney Warren on what grounds did the judge reject the request for an injunction. “According to the judge, Uber and Postmates did not establish the level of harm necessary to justify a preliminary injunction to halt application of the law during the lawsuit,” explains Warren. “Uber was asking the court to issue a preemptive order, which basically said that ‘You cannot apply AB5 to the plaintiffs now because they will suffer irreparable harm,’ but the judge told the plaintiffs that on balance they haven’t shown the necessary level of harm to justify the order.

Warren’s explanation begs the question: how much harm must be shown to be irreparable? “It can be a sliding scale. One thing needed for a preliminary injunction is that the plaintiffs have to show a likelihood of success in proving their case, i.e., the AB5 legislation targeted them unfairly to the benefit of other industries,” says Warren. “Uber and the other plaintiffs didn’t show enough harm, and likelihood of success, to stay the application of AB5 when weighed against the equities and public interest in allowing the state to enforce the law.”

With this past and ongoing litigation in mind, the “Protect App-Based Drivers and Services Act” may be a challenge. And interesting. “If passed, this initiative might create another hodgepodge in California law but I think consumers may support it,” says Warren. “If voters go completely against Uber and other app-based delivery companies, then it will definitely provide more backing behind the state of California’s effort to enforce AB5.”

The Ballot Initiative

The ballot initiative, known as the California App-Based Drivers Regulations Initiative, may appear on the ballot in California as an initiated state statute on November 3, 2020. It would consider app-based drivers to be independent contractors and enact several wage and labor policies that would affect app-based drivers and companies.

This means that the ballot measure would override AB5 on the question of whether app-based drivers are employees or independent contractors.

Protect App-Based Drivers and Services Act

This “proposal” is an alternative to AB5. It would maintain drivers as independent contractors, while adding more worker protections, including:
  • minimum earnings guarantee of at least 120% of the minimum wage,
  • expense reimbursement to include 30 cents per mile for gas and wear-and-tear,
  • health care subsidy and insurance to cover on-the-job injuries.
The companies say that works out to about $21 per hour, when drivers have a passenger in the car.

But several economists have noted that this the proposal may sound better than it is. For instance, the University of California at Berkeley Labor Center said that factoring in hidden costs--unpaid waiting time, unpaid payroll taxes and underpayment for driving expenses-- concluded that the actual wage drivers will likely make closer to $5.64 per hour. And there’s the main issue: drivers will get paid only from the time when they accept a ride until they drop the passenger off. That means no pay when they're waiting for rides, which averages out to about 70% of drivers' time, according to the Labor Center. Uber disputes these findings.


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