Uber CEO sees California ballot initiative as a model for other states

Dara Khosrowshahi, CEO of Uber, speaks on stage during the 2019 Concordia Annual Summit. | Riccardo Savi / Getty Images for the Concordia Summit

OAKLAND – Dara Khosrowshahi, CEO of Uber, said Thursday that his tech coalition’s election victory in California this week should serve as a blueprint for regulating the gig economy in other states and nations.

Uber and other app posting companies hit a milestone in America’s most populous state on Tuesday when voters overwhelmingly passed their Proposal 22 to protect companies from having to classify their workers as workers. The companies spent more than $ 200 million to convince California voters.

Khosrowshahi stressed in a call for investors that the results will likely echo beyond Uber’s home state of California.

“Going forward, we will be louder for new laws like Prop 22, which we believe will strike a balance between maintaining the flexibility drivers value so much and the protection all gig workers deserve.” said Khosrowshahi, adding, “It is a priority for us to work with governments in the US and around the world to make this happen.”

Once Proposition 22 is certified, Uber drivers and other independent contractors remain while they receive a minimum salary and benefits, as is the case with some employer’s health care regulations. However, that compensation is less than what the companies would have had to pay under a new California law that went into effect earlier this year.

The proposal was vehemently opposed by labor unions and labor-minded Democratic leaders, despite Governor Gavin Newsom’s noticeable reluctance to take sides, even when pressured in the final days of the election. The governor has long hoped for a tech-labor deal, and by remaining neutral signaled that he would like negotiations to continue.

The courts were ready to force gig companies to treat drivers as full-time employees and the companies threatened to cease doing business in the auto-dependent state.

But Tuesday’s earnings suddenly gave gig companies a boost. Uber’s stock price is up 17 percent since voters approved Prop. 22.

Why it matters: Winning Proposition 22 was critical for technology companies looking to protect their contractor-dependent business models in California. But, as Khosrowshahi indicated, it was also about drawing a line in the sand and setting a precedent for industrial disputes across the country.

Context: Tech companies have shattered spending records by pouring more than $ 200 million into passing Prop 22 and bypassing Assembly Bill 5. The new law cements a decision by the California Supreme Court requiring employers to treat more workers as workers rather than contractors.

The battle for AB 5 and the subsequent Prop 22 campaign acted as proxies in a larger, ongoing battle for the nature of the work. Organized workers and democratic allies viewed the law as critical backing for stable jobs and accused tech companies of accelerating an exploitative shift from employment to contracting.

The fight reflected the high stakes and went beyond California. Democratic presidential candidates weighed on AB 5, including Democratic presidential candidate Joe Biden, who with a victory in the White House could soon change national dynamics.

The House Democrats passed a labor law, the PRO Act, which would have enshrined an AB 5-like test at the national level. Republicans turned AB 5 into a campaigning theme, berating Democrats for losing jobs to workers who they said preferred job flexibility over performance.

After California attorney general Xavier Becerra won a court ruling that forced Uber and Lyft to reclassify their workers, the companies threatened to cease operations in California. They retreated after winning an eleven hour hiatus, but the stalemate caught national attention. Republicans in Congress cited the episode as an example of Democratic overreach.

What happens next? Khosrowshahi and other technical executives have long advocated an employment model that straddles the dichotomy between workers and contractors, with workers setting their own working hours but offering them sustainable benefits. You have also advocated a form of collective bargaining known as sectoral bargaining, which is different from union formation for workers.

After Prop. 22’s resounding victory, look for a tech industry that is doubling its pressure – both in legislature and in Congress – on this hybrid model. Elected officials in blue states like New York considering California pushes might retreat after seeing the power of the industry.

Lyft officials took a similar approach to Khosrowshahi, saying in several interviews since Prop. 22 that they hope to forge a permanent labor compromise.

“Prop. 22 has resolved the issue of driver independence, but we know there is more work to be done,” said Lyft President John Zimmer told the San Francisco Chronicle.

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