On November 4, local time, according to the associated press, proposition 22 was voted by California voters, which would allow Uber, LYFT and doordash, an online car Hailing platform, not to classify drivers as employees.
Bill 22 allows the companies to bypass California laws designed to provide similar employee protection to drivers. Uber, LYFT, doordash, instacart and postmates spent about $200 million to pass the bill 22, which is also the highest campaign in Californias history. After counting more than 60% of the votes, 58% were in favor of the proposal and 42% were against it, prompting the associated press to predict that the bill would be passed.
The Wall Street Journal reported on the 4th that the passage of bill 22 enabled companies such as Uber to avoid complying with a regulation that could reshape their business models and hurt their businesses in the most populous state of the United States. In addition, the proposal sets the tone for the regulation of odd jobs in other parts of the country.
In order to win public support, companies such as Uber did guarantee new protection measures. They told voters that drivers who worked 15 hours or more a week would be offered health insurance, occupational accident insurance and 30 cents per mile. Opponents of the proposal say the benefits are far lower than those given to full-time employees.
The Wall Street Journal said the passage of bill 22 was a heavy blow to California legislators who were involved in a high-risk battle with these companies over the classification of odd jobs. Last year, California passed a law (California Assembly bill 5) to try to force companies such as Uber to reclassify drivers as employees to qualify for benefits such as minimum wages, paid sick leave and unemployment benefits.
No company has reclassified workers since Californias law to protect casual workers came into effect on January 1. Instead, they united to support proposition 22. California and three big cities in the state sued Uber and other companies to enforce the law in May, but the lawsuit will now be replaced by the passage of proposition 22.
The business model of Uber and other companies is to use independent contractors (also known as casual workers) to keep labor costs low. For these companies, the risk of reclassifying workers is high, putting pressure on their already fragile bottom line and setting a precedent for other states in the United States to challenge their business models.
In recent months, companies such as Uber have advertised and pushed notices to drivers that only a small number of drivers will be employed as employees. In their message to customers, they said fewer drivers meant longer waiting times, and taxi prices would rise due to the higher costs of reclassification. Dara khosrowshahi, Ubers chief executive, estimates that if the vote on proposition 22 fails, the price of a ride could double.
Californias victory has allowed companies such as Uber to retain their business model in one of their biggest markets. In the second quarter, California contributed 9% of Ubers total business and 16% of LYFTs total business in the second quarter.
However, the regulatory challenge is not over. Massachusetts sued companies such as Uber in July, and others threatened to take similar actions.
If Californias proposition 22 vote fails, Uber is considering operating in only four areas of the state, namely, the San Francisco Bay area, Los Angeles, San Diego and Orange County, according to people familiar with the matter. The company has discussed working with third-party fleets, which in turn hire drivers and Uber does not have to hire them directly.
U.S. stocks closed on November 4 local time, with Uber up 14.59% and LYFT up 11.28%.