Uber & Lyft Legal Battle Exposes The Big Lie About Gig Work

Today, a California appeals court granted a last-minute extension on a court order that required Uber and Lyft to reclassify its drivers as employees by midnight tonight. Over the past week and a half, both rideshare companies had been threatening to shut down operations in California in response to a long legal battle around gig workers that kicked into high gear last fall with the passing of a California law called Assembly Bill 5. The bill codified app-based gig workers’ status as employees, not independent contractors, who are entitled to typical employee rights and benefits such as minimum wage, unemployment insurance, and health care. To avoid providing California drivers with all of these benefits, Uber and Lyft would have rather left the state altogether. Now, both companies have until August 25th at 5 PM to submit their written consent to expedite reclassification of drivers.

Not much has changed for rideshare drivers since AB 5 was passed last September, though; the companies still maintain that their drivers aren’t employees. A preliminary injunction on August 10th gave Uber and Lyft just ten days to reclassify drivers as such. The companies immediately asked for the order to be further delayed, and the apps were preparing to shut down at 11:59 PM today. Lyft told Refinery29 that if nothing changed, a temporary shutdown would be inevitable, as it’s difficult to change the way the business operates in such a short time frame. An Uber spokesperson told Refinery29, “When over 3 million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry during an economic depression.”

Both Uber and Lyft celebrated the extension granted this afternoon. “While we won’t have to suspend operations tonight, we do need to continue fighting for independence plus benefits for drivers,” said a Lyft spokesperson.

According to legislators and legal experts, rideshare apps have had years to transition to an employee model. In 2018, the California Supreme Court ruled on Dynamex Operations West, Inc. v. Superior Court, laying out a clear standard for who counts as an independent contractor using a three-pronged test. All three conditions have to be met for a worker to be considered an independent contractor, which courts have found isn’t the case for Uber and Lyft drivers, and the Dynamex decision noted that workers would be presumed employees until proven otherwise by the test. 

Uber CEO Dara Khosrowshahi has said that a shutdown could potentially last for months. It wouldn’t be the first time. Uber and Lyft halted  services in Austin, Texas, for a year from mid-2016 to mid-2017 after lawmakers there proposed a fingerprinting and background check requirement for drivers. The companies have aggressively fought regulation attempts before — and have often won.

Uber and Lyft have argued there would be permanent consequences to treating drivers as employees. Drivers would lose flexibility and freedom, and no longer be able to decide their own hours; in turn, they would earn less, and fewer drivers would be hired overall.

All of these factors lead to a key point — that, based on several surveys, a majority of drivers themselves don’t want to be employees. Veena Dubal, a law professor at UC Hastings, has done extensive research on rideshare gig workers, including surveys and in-depth interviews with San Francisco Uber drivers between 2016 and 2019. Her findings show that while it’s true many drivers don’t want to be reclassified, the issue is more nuanced than a simple rejection of employee status. In a paper detailing this research, she mentions the existing academic criticism of frequently cited surveys that claim to show that drivers want to remain independent contractors. The survey questions often misleadingly frame being an employee as mutually exclusive to work flexibility, when that’s not true. 

“If you instead disaggregate the question and ask, ‘Do you want a time-based wage floor?’ They will say yes,” Dubal says. “‘Do you want unemployment insurance?’ They will say yes. ‘Do you want workers’ compensation?’ They say yes.”

Across 50-plus interviews with Uber drivers, she found that fear was a common thread. “Their ambivalence was fueled by what a terrible employer Uber could be, and how Uber would never agree to an employment model,” the paper notes, “and fears that the company would take away their flexibility — not because employee status necessitates a shift schedule — but just because they could.” In one interview, a driver said he picked independent contractor status on Dubal’s survey because it was “most realistic.” He told Dubal, “Why would they change? The law bends for them.”

While Uber and Lyft maintain that drivers are at risk of losing certain freedoms because of AB 5 — such as the freedom to make extra income, or to drive when they want to — Edan Alva, a former Lyft driver in San Francisco and an organizer for advocacy group Gig Workers Rising, offers a different take on that word. “The thing with these companies is that they pay just enough for a person to survive if nothing goes wrong,” he says. “It’s sort of like Russian roulette. If nothing goes wrong, you get just enough to live another day.”

Gig workers do what’s called “precarious work,” which is a focus of Dubal’s research. On yesterday’s episode of the podcast Radical AI, she explained that for most of the 20th century, Americans generally had “secure work” with stable hours and predictable earnings. With the rise of app-based tech companies fueling the gig economy, though, work in the modern context has become increasingly insecure.

Gig work companies have often packaged this uncertainty as an opportunity. There’s always room to fantasize about the potential for higher earnings, as long as you’re willing to hustle. “The characterization of this as a side hustle is really misleading for two reasons,” says Dubal. “One, the majority of the work is done by full-time drivers.” Uber and Lyft say that most drivers only work part-time, for extra money, but these part-timers aren’t the ones fulfilling most of the ride hails. “Also, even the drivers who do it less than full-time are dependent on the work. They’re not doing it for extra pocket change. They’re doing it because their full-time job doesn’t offer them enough money.”

What’s more, Dubal suspects that when rideshare companies talk about how most of their workforce are casual drivers who don’t have strong feelings on employee benefits, they may be including those who start driving and quickly quit. Retention is a big problem for Uber and Lyft; between 2015 to 2016, 68% of their drivers quit within six months.

Precarious gig work is overwhelmingly done by non-white immigrants, adding an extra component of vulnerability to it. “Because immigrants don't have the same social networks that people who have been in this country for a long time have," Dubal says, they may not have the right licenses to continue doing the work they did in the country of their birth, and English fluency may be a barrier to finding more traditional employment, especially in corporate spaces. “Then you hear from advertising that these companies send out that you could make all of this money, you could be your own boss,” says Dubal.

Alva, who is an immigrant to the U.S., started driving part-time with Lyft in 2014 before becoming full-time two and a half years ago when he lost his primary job. “That's when I realized how ridiculously impossible this business model is,” he says. Despite being full-time, he estimates he earned close to $10/hr after expenses. It was barely enough to put food on the table. There have been a number of stories about rideshare drivers who become homeless, living in their cars.

Dubal’s research has shown that the flexibility that drivers have in setting hours is overstated. Their schedules are shaped by demand and incentives — if they log on at a certain time because that’s the only free time they have to drive, but it's a period of low demand, they’re not going to make much money. Additionally, Uber and Lyft tell drivers when there will be periods of high demand, and encourages drivers to work during those hours to receive bonuses. Not getting those bonuses will often mean a driver doesn’t make enough money, Dubal says. “Professional drivers who’ve worked many years will tell you that their schedules ended up becoming quite rigid.”

A well-known Cornell University study estimated that drivers in Seattle earned an average of $23/hr — but a later study by The New School and UC Berkeley argued it was only $9.73/hr when accounting for expenses. The Economic Policy Institute has also broken down how much a driver might really pocket after fees, expenses, and self-employment taxes. According to Alva, pay has gone down in the past several years too. Dubal’s research shows that, between 2014 to 2019, long-term rideshare drivers saw their earnings drop by about 60%.

Alva quit driving for Lyft on April 7th. “I stopped exactly because of the coronavirus,” he says. Ridership plummeted, and the cost and difficulty of obtaining his own cleaning supplies tipped him over the edge. He was now making around $5/hr while driving. It just wasn’t possible to continue.

When asked if he wants to continue doing “flexible” gig work or find a traditional full-time job, his answer shows exactly what Dubal means by immigrant gig workers in particular being carved out of more traditional labor markets. “I'm a 50-year-old guy. It’s a little more difficult at my age to find the right niche,” he says. “I’m doing my best.” Currently, he’s a census worker.

To fight back against AB 5, Uber, Lyft, Doordash, Postmates, and Instacart have funded a powerful $110 million campaign backing a California ballot measure called Proposition 22, which will be up for vote in November.

Labor advocates argue that this measure creates an exemption for gig companies so they don’t have to properly classify workers as employees, as AB 5 is enforcing. It appears to make compromises on several protections and benefits, like providing some health care coverage and setting a wage floor. But an analysis of Prop 22 by the UC Berkeley Labor Center estimates that the actual minimum wage enforced by the ballot measure would be $5.64/hr. “[Drivers] are not paid for all the time that they spend laboring,” says Dubal. “Right now, [Uber and Lyft] rely on having many, many more drivers than there are riders and demand, so that they can offer quick service.” This means drivers spend a disproportionate amount of time logged onto the rideshare app waiting for a ride request, but not actually transporting passengers. They don’t get paid for this waiting time, and Prop 22 would ensure this practice continues. Prop 22 also would exclude app-based gig workers from being protected by workplace anti-discrimination laws, receiving unemployment benefits, being paid sick days, while making it nearly impossible for drivers to organize and collectively bargain.

The companies backing Prop 22 have started including pop-up messages in their apps and sending emails pushing drivers and passengers to vote yes. Alva worries about the danger in putting such pro-Prop 22 messages directly in apps, because, for many workers, that may be their only point of exposure to Prop 22. Most people aren’t going out of their way to research what the ballot measure would do. “The challenge here is finding ways to inform drivers and inform the people of California,” says Alva. Drivers have organized, but they don’t have $110 million to spend. “I’m concerned because what they're doing is a numbers game,” says Alva. “They’re flooding the internet and any channel of communication with their perspectives.”

The scariest part of Prop 22 is that, once it passes, there’s virtually no turning back. Amending any part of it requires approval from 7/8ths of the California legislature, and it would supersede local laws. “If San Francisco or Los Angeles were in an emergency situation like a pandemic and wanted to ensure that drivers in their cities have paid sick leave were they to contract the coronavirus, that would be unlawful under the terms of this proposition,” says Dubal. Similar measures may spread to other parts of the country. “It’s probably, in my lifetime, the most dangerous labor law that I have seen,” she says.

When asked what the media should emphasize in its reporting on Prop 22, Dubal says, “Especially in the early years, the media has been complicit in saying this is the free market at work. What I'd like to see emphasized right now is that Proposition 22 would bring back exploitative work practices that we got rid of in the early 20th century. In that sense, not only are they not innovative, they are retrograde.”

Alva agrees, saying, “The only difference between the gig industry and the industrial revolution is that the gig industry expects workers to buy their own machines and bring them to work.”