Among the more significant developments stemming from the November elections in the United States was a decision by California voters to pass a ballot measure exempting firms such as Uber and Lyft from classifying their workers as employees rather than contractors.
The fact that these companies and others like them together spent an estimated US$200-million on their campaign to get Proposition 22 passed – the costliest in the state’s history – tells you everything you need to know about what was at stake.
The victory meant companies using gig workers could continue to avoid providing them with what most businesses do: paid sick leave, unemployment insurance, overtime and a set minimum wage. In exchange, the ride-hailing and food-delivery companies agreed to some concessions around minimum earnings based on the time workers spent actually fulfilling a ride request or food order, but not those stretches spent waiting for a job.
It’s not difficult to see why these companies were so desperate to be excused from the employee obligations most companies in the state are under. The whole gig-economy business model relies on scaling up massive fleets of “independent contractors,” which the firms argue is the only way they can remain profitable while offering their services at the rates they do. Higher costs for them means higher costs for the consumer, which would kill their whole business model. Or so they want us to believe.
Until these companies provide us with their internal profit-and-loss modelling, the public has every right to be skeptical about what they are telling us in defence of their insistence that workers be treated as independent contractors. But the fact is, many Americans (and people around the world) love the services they provide, and frankly don’t care too much about the companies’ balance sheets or the working conditions of the people they employ.
Maybe they should.
A 2019 study by economists at the University of California, Berkeley, found that Proposition 22 guarantees gig workers a minimum wage of $5.64 an hour when only “engaged” time is calculated. (Some people sit in their cars for hours waiting for a “gig.”)
To no one’s surprise, other companies in the U.S. took note of what happened in California. Two months after Proposition 22 passed, a group of grocery-store giants in the U.S. announced they were firing their full-time, benefits-receiving delivery staff and replacing them with subcontractors from – you guessed it – the delivery-gig platform DoorDash.
Needless to say, countries around the world, including Canada, are watching what’s happening in the U.S. with intense interest. The debate around gig companies and workers’ rights will be arriving here soon. It’s a discussion already well advanced in countries such as Britain, where Uber recently announced it would offer guaranteed entitlements to its workers there, including holiday pay, a pension plan and a minimum wage. This comes after the country’s top court found that Uber drivers had to be classified as “workers” – a unique classification that puts them somewhere between an independent contractor and a full-fledged employee with a wide range of benefits.
Uber, Lyft and others like them are probably seeing the writing on the wall in Canada. In their 2019 election platform, the federal Liberals promised to enact legislation that would give better protections to gig workers, who number around 700,000, according to the Bank of Canada. The pledge is still to be met.
Some of the gig companies are trying to get ahead of any law that would impose burdensome costs on them. Uber has already started promoting a plan for Canada in which app-based firms would contribute a percentage of money toward a worker’s health and dental benefits or a retirement plan. How much a worker would get would depend, of course, on their number of “engaged” hours. Bloomberg has reported Uber has offered to contribute $40-million to such a fund.
We have certainly not heard the last word on this. Clearly, app companies are beginning to feel some heat around worker rights, but whether the pressure grows is not yet clear. Obviously, the Liberals have not felt any impetus to bring in the legislation they have promised, or they would have done so by now.
The other question mark is the public, which clearly enjoys the costs and the services of many of these app firms. Will it side with the gig worker and unions and other companies who feel threatened by them if it could jeopardize those services altogether? Tough to say.
But the debate has yet to begin. And it could be loud and ugly.
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Gary Mason