The gig is up

A California court upholding the classification of gig workers as independent contractors does not bode well for gig-economy workers worldwide

California, California court, Silicon Valley Bank, gig economy, gig workers
What’s true of blue-collar workers such as drivers today could well be true of white-collar workers like computer programmers tomorrow.

By Siddharth Pai

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All the noise about Silicon Valley Bank has drowned out an important development in California, which, in my opinion, is a travesty for the rights of gig workers working for Silicon Valley-spawned companies such as Uber, Doordash, Instacart, and Lyft. These and other gig-economy companies scored a victory after a California appeals court upheld the current law classifying gig workers as independent contractors instead of employees.

Bloomberg reports that the decision by a California Appeals Court on Monday, March 13, struck down a lower-court ruling that found that Proposition 22, the California state measure that lets companies treat workers as independent contractors, violated California’s constitution. The passing of Proposition 22 in November 2020 exempted the gig-economy businesses from a state labour law requiring more companies to hire workers as employees and provide them benefits.

Let me explain: There is a little-known fact about US presidential elections which is not appreciated outside the US. During a US presidential election, other referendum choices are also on the ballot in each state. Given the circus in 2020, with the incumbent’s refusal to accept defeat, most of these issues, some of them pivotal, got relegated to the backseat. California’s 2020 Proposition 22 was one such issue. It was critically important to firms such as Uber and Lyft. These gig-economy businesses that use “casual” workers had threatened to leave the state had the measure not been voted in. It wanted its drivers classified as contractors and not employees.

California is a left-leaning state and voted overwhelmingly for Joe Biden. Yet, Proposition 22 made it to the ballot. The gig-economy ride-hailing apps spent over $200 million to see Proposition 22 through. Labour unions opposed to it could only muster about a tenth of that sum. The bigger money paid off. Over 58% of California’s voters opted to continue classifying drivers at these services as contractors.

Employee classification would have given rise to a slew of labour rights that today’s gig workers, as “independent contractors”, do not enjoy. Workers for these gig companies in California will not have the same right as other employees to paid sick days, overtime pay, unemployment insurance or a workplace covered by occupational safety and health laws. California’s Assembly had tried to head this off earlier with a law of its own called Assembly Bill 5 (AB 5), which would have guaranteed these rights. Proposition 22 overturned this Bill. According to the LA Times, one lawmaker, who had sponsored AB 5 and opposed Proposition 22, said: “Instead of paying their drivers, gig-corporations forged a deceptive $204-million campaign to change the rules for themselves and provide their workers with less than our state laws require.”

California’s voters seem to have a curious inclination to set right-wing precedents by adopting state-level propositions at the ballot. Smart or misleading campaigns run before elections tend to sway voters’ opinions in this otherwise left-leaning state. Voters were bombarded with emails, glossy fliers, text messages, and video spots claiming that drivers being contractors would actually lead to higher earnings for them. It is quite evident that the big money advertising paid off.

Now, the appeal Court’s ruling seems to have cast Proposition 22 in concrete. The latest ruling was a win for companies including Uber, Lyft, DoorDash Inc., and Instacart Inc. that rely on millions of drivers and couriers for on-demand services such as ride-sharing and food delivery. It remains to be seen whether this case will continue through the appellate process and approach a higher court.

Gig businesses will take heart from the victory in California and hope to replicate this success across the US (and I daresay beyond its shores). Emboldened by the result in California, Uber and the others will move similar legislation in other US states. These could include New Jersey and Massachusetts, where state regulators have made them uncomfortable, or New York or Pennsylvania, where courts have rejected their argument that workers run their own independent businesses as contractors.

In India, we are somewhat isolated from such issues. Our disposition towards “informal economy” workers has long had laissez faire attitudes. This is completely understandable, given that we are a developing economy and that a large proportion of our work, at least to begin with, depends heavily on the unorganised sector. Over a period of time, this work gets regularised or regulated such that a variety of concerns from monopolistic practices to labour rights get enshrined in law. It’s thus a welcome surprise to see an early attempt in our country at ensuring that food delivery boys and ride-hailing drivers get some social security benefits under a revised labour code.

Will Big Tech’s money and marketing win the day? On the one hand, light regulation is good for business. On the other, it leaves room for exploitation. But if we look to economies that have had more experience with such workers like Silicon Valley in California, a different picture emerges. The truth, at least according to the National Employment Law Project (NELP), was that someone driving an average of 35km every hour in a 40-hour workweek would make $287 less per week and suffer healthcare benefit reductions if Proposition 22 passed. This is in addition to a slew of healthcare and other reductions. The NELP claims that a “permanent underclass of workers” has been created.

This is a space we must watch closely, as more jobs become “gig” work. What’s true of blue-collar workers such as drivers today could well be true of white-collar workers like computer programmers tomorrow.

(Technology consultant and venture capitalist)

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First published on: 16-03-2023 at 03:15 IST
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