After an appeals-court decision this week, California ride-hailing drivers and other gig workers will remain independent contractors instead of employees for the foreseeable future — a win for gig companies that they will surely try to replicate around the country and beyond.
Gig companies such as Uber Technologies Inc.
and Instacart spent more than $200 million to put Proposition 22 on the state ballot in 2020, saying in many television, radio and other ads that app-based drivers and couriers would get new benefits and still be able to set their own schedules. More than half of the state’s voters, or 58%, voted for the measure. A judge ruled it unconstitutional in 2021, though there was no emergency stay and it stayed in effect.
This week, an appeals court in San Francisco reversed that decision, mostly upholding Prop. 22 — though the issue is likely to be appealed to the California Supreme Court.
Prop. 22 promised gig workers some benefits they didn’t have before, including the ability to qualify for a healthcare stipend and disability insurance. It also promised guaranteed pay of 120% of minimum wage for “engaged” time, which is the time a gig worker is actually making a delivery or completing a ride.
In the more than two years since Prop. 22 took effect, the companies and some workers’ groups have released conflicting studies about its effects. Most recently, the companies — without disclosing many details — say the law has helped gig workers, while the workers themselves give it mixed reviews.
See: Uber, Lyft drivers say new California law isn’t solving their healthcare needs
Eduardo Romero drives for Uber and Lyft in the Los Angeles area and is a board member at Rideshare Drivers United. He has been a ride-hailing driver since 2017, and driving for the apps has been his only source of income for the past three years, he told MarketWatch on Thursday.
Though he says “things changed for the worse” after Prop. 22, he acknowledged that he now receives a healthcare stipend, which amounts to $1,274 every three months.
“That does help,” Romero said. “But now the cost of living is much higher, and the companies are charging passengers more but we drivers are making less.”
Uber and Lyft, under pressure from shareholders to turn a profit, have raised the cost of their rides over the past couple of years. The companies’ “take rates,” or the amount they keep per ride, have also increased, according to their earnings reports.
Romero said he used to drive 40 hours to make about $1,200 a week. Now he has to drive 48 to 52 hours to bring in that much, he said — and that’s before expenses such as fuel, car insurance and wear and tear on his car.
That’s part of why he also said drivers “aren’t really contractors. We can’t negotiate our rates and pay.” “I am very frustrated that the appeals court made the decision to help the corporations,” he added.
See: Uber showed drivers lower fares than passengers, blames California law
Also: Uber and Lyft drivers net less than $7 an hour after California law passed, driver-led study finds
Another gig worker in the Los Angeles area said Thursday that he works part time delivering for Uber Eats, about 20 to 35 hours a week, and thinks “Prop. 22 is OK.”
Ron, who asked that only his first name be used for this story out of fear of retaliation, said he doesn’t need the healthcare stipend because he gets healthcare through his wife’s job.
But he also said, “To be honest, I don’t know how anyone can get above a poverty-level income in California doing this work.”
Meanwhile, some California voters who voted for Prop. 22 because they felt it would help gig workers felt misled, according to some reports and a poll. What is clear is they are now paying more for rides because Uber and Lyft have passed on to their customers at least some of the cost of providing the driver benefits. The companies are tacking on a per-ride fee they call a “California driver benefits fee.” For Uber, that’s 30 cents a ride in San Francisco, and varies in other parts of the state. For Lyft, that’s 75 cents a ride in Los Angeles, but it’s unclear whether the price varies by city.
Uber said it had provided $95 million in healthcare stipends to drivers in California as of the third quarter of 2022, but a spokesperson declined to disclose what portion of that was paid for by the company and what portion came from rider fees.
DoorDash has not passed on to consumers the costs of providing the Prop. 22 benefits to its couriers, according to a company spokesperson. But the company does have “a small regulatory fee” for merchants in the state, the spokesperson said, adding that some consumers could see regulatory fees because some municipalities have implemented price caps.
Lyft declined to answer any of MarketWatch’s questions about Prop. 22 benefits and costs. Instacart did not return a request for answers to MarketWatch’s questions.
The battle is not over. The plaintiffs in the lawsuit against Prop. 22 — four drivers and the Service Employees International Union — will probably appeal this week’s court decision.
And some workers and union officials alike see a sliver of hope in that the appeals court also severed one provision of the law, which would have required a seven-eighths vote of the state legislature to amend it. That paves the way for lawmakers to introduce a bill to allow gig workers to collectively bargain, they say.
“This could give us a chance to have a voice,” said Romero, the Uber and Lyft driver. But in the next breath, he also said he doubted that “it will change much.”
See: Uber and Lyft drivers in Massachusetts are fighting for the right to unionize