More than four million Californians — over 20 percent of the state’s workforce — have recently lost their jobs. Yet you wouldn’t know it from the actions taken yesterday by California’s top public attorneys.
The state Attorney General and the Los Angeles, San Diego, and San Francisco City Attorneys filed a lawsuit against Uber and Lyft for allegedly misclassifying their combined half a million or so California drivers as independent contractors. “California law makes it clear that Uber and Lyft drivers are employees,” said Los Angeles City Attorney Mike Feuer in a press release announcing the suit. “We allege Uber and Lyft defy this mandate [and] exploit their drivers…”
California lawmakers outlawed many contracting jobs — not just those in the on-demand economy — last year when they passed Assembly Bill 5. This lawsuit marks the enforcement phase of this law, and it comes at the worst possible time. Uber, Lyft, and other gig opportunities are the only jobs that many out of work Californians can quickly and easily get right now.
Uber and Lyft, similar to many of their Silicon Valley brethren, are mere software platforms, which match drivers with riders. Classifying these drivers as employees means saddling these tech companies with the associated taxes, benefits, regulations, and liabilities that labor law requires, raising costs and reducing job opportunities. Uber and Lyft drivers don’t have to report to a boss, can decline work, set their schedules, and blast Dr. Dre from their radios. Know any other employees with these freedoms?
California public officials claim that their lawsuit is looking out for the welfare of gig workers. “As law enforcement leaders across the state, we’re going to aggressively protect these hard-working drivers,” said Feuer.
Yet Uber and Lyft drivers aren’t complaining. Though it may be hard for career politicians to understand, many people prefer flexible work arrangements where they can schedule gigs around their childcare, school, or traditional work responsibilities. A study published last year in the Journal of Political Economy concludes, “Uber drivers benefit significantly from real-time flexibility, earning more than twice the surplus they would in less flexible arrangements.”
The fact that there’s little-to-no clamoring among actual drivers, or any independent contractors ensnared by AB5, to be reclassified as employees is — in the words of Sherlock Holmes — “the dog that didn’t bark.”
California public officials argue that this flexibility argument is a red herring. According to San Francisco City Attorney Dennis Herrera, “There is no legal reason why Uber and Lyft can’t have a vast pool of employees who decide for themselves when and where they work…”
But if drivers are suddenly subject to employment rules such as overtime pay, then, of course, these companies would have to police their schedules. Keep in mind that despite the public attorneys’ claim that Uber and Lyft are misclassifying “to benefit their bottom lines,” these companies have never turned a profit.
So, if contractors aren’t complaining and the argument to treat them as employees is weak, why have California legislators invested so much time and political capital in this cause? Because independent contractors are extremely difficult to unionize or use as plaintiffs in class action employment lawsuits. And unions and trial lawyers are among the biggest political donors to California public officials. Politicians’ concerns over drivers’ welfare are just crocodile tears to lubricate their paymasters’ agenda. Talk about a non-traditional employment relationship.
Fortunately, California voters have the opportunity to rectify AB5 in a November ballot measure that would exempt gig companies from this law. Expect a well-funded opposition to the campaign paid for by Big Labor and trial attorneys. Yet Californians, who have benefited tremendously from entrepreneurial contracting arrangements over recent decades, should see past such misinformation efforts. Let’s just hope that by then, the need to keep gig opportunities available for those who need them most isn’t quite so pressing.
Will Swaim is the president of the California Policy Center.
