It’s on the ballot. California voters in November will get to vote on the Protect App-Based Drivers and Services Act, an initiative pushed by Lyft Inc. (NASDAQ: LYFT), Uber Technologies Inc. (NYSE: UBER) and others.
California Secretary of State Alex Padilla announced Friday that the proposal got enough signatures to qualify for this year’s election. If approved, the initiative would allow drivers for ride-hailing services to remain independent contractors but also give them new benefits, including a guaranteed wage above the minimum and contributions to an insurance plan.
The ballot initiative is part of an ongoing dog fight over how ride-share drivers are classified. The results in November could have a profound impact on Lyft stock, which has suffered recently.
Before the holiday weekend, Lyft shares closed at $31.26, up 2.86%. Lyft is down about 25% year to date, while Uber stock is up nearly 18%. The S&P 500 index is down about 6.5% for the same period. Investors may find Uber more attractive thanks to its food-delivery arm, something Lyft doesn’t offer.
Employee or Independent Contractor
Lyft and Uber have always considered their drivers independent contractors. But California, some other states and some cities object, saying many of these drivers work 40 hours or more per week.
State and local governments want the ride hailers to classify their drivers as full-time employees, which has huge financial implications. The companies would need to offer health insurance and other worker benefits. And crucially, they would need to pay taxes to support state unemployment coffers.
A recent study found that if the ride-sharing companies had been forced to classify drivers as employees instead of independent contractors, they would have owed the state of California $413 million between 2014 and 2019. That’s according to an analysis by the UC Berkeley Labor Center.
Lyft argues that it is a supplemental, not primary, means of income for many of its drivers. “For starters, in this hypothetical reality, everyone who has chosen to drive for Lyft would have been hired by Lyft as an employee,” a spokesperson told Gizmodo after the UC Berkeley study came out. “As we’ve repeatedly said, that wouldn’t happen in the real world—instead, many, many Californians would lose the opportunity to earn by driving with Lyft.”
At the Ballot Box
California is famous for its ballot initiatives, which have been a very successful way of changing the law. One of the biggest was the taxpayer revolt that led to Proposition 13 from the 1970s, which reduced state property taxes.
The ride-sharing ballot initiative was proposed in response to Assembly Bill 5, which passed the California legislature last September. The bill, which took effect Jan. 1, requires companies to reclassify so-called gig workers as employees, which would cover them under laws regarding minimum wage, overtime pay and unemployment insurance.
Uber and Lyft haven’t complied with the law, so California Attorney General Xavier Becerra filed suit against them this month. The cities of Los Angeles, San Francisco and San Diego joined the legal action.
While the ride-sharing companies want to avoid the expense of adding thousands of full-time employees, they did move to sweeten the deal for drivers under the ballot initiative. If passed, Lyft and competitors would be required to pay drivers at least 20% more than the minimum wage, plus 30 cents per mile (to help cover expenses and car depreciation). They would also offer accident insurance and pay a monthly stipend to help cover health insurance.
Californians should expect to hear a lot about this issue in the coming months, as both sides push for “yes” or “no” votes. Other states fighting Lyft and Uber will be watching closely.