A recent appeals court decision raises questions on what Uber and Lyft operations could look like in California if the companies’ Proposition 22 ballot measure fails to pass on Tuesday.
The First Appellate District ruling on Oct. 22 affirmed the August ruling by San Francisco Superior Court Judge Ethan Schulman that the companies are subject to AB5 employee mandates. If the ballot measure passes, however, the companies will be able to exempt their rideshare drivers from AB5 and provide their own worker benefits.
Late October polling by the Berkeley Institute of Governmental Studies showed 46 percent of voters in favor of Prop 22, 42 percent opposed, and 12 percent undecided.
“The courts said no, they would not dismiss, because the case was properly framed as matter of law. So those companies would have to comply 30 days after the ruling, absent Prop 22,” Graham H. Walker, executive director of the Independent Institute in Oakland, told the Northern California Record.
“The campaign against Prop 22 – which is same thing in favor of AB5 – claims it’s seeking to help workers, but in fact the little guy gets hurt by AB5,” Walker said. “The big guys got carveouts, and the little guy needs to be made the focus of attention authentically. We want more opportunities for them to earn income and be on their own, not fewer; that’s what this is all about.”
“Keep in mind, there is a view that if it doesn’t pass, the companies have said they would leave California because the business model won’t work,” Walker said. “They might try an interim measure first – like in Spain and Germany, because of similar regulatory and union pressures in Europe – and contract out with vehicle fleets.”
Walker noted that when Gov. Newsom signed AB5, he said the next step would be, “creating pathways for more workers to form a union.”
By some estimates, there are roughly 400,000 rideshare drivers in California.
“I think the drivers are in need of protection like most workers are,” Stanford professor William B. Gould IV, author of A Primer on American Labor Law (6th edition. 2019), told the Record. “If [Prop 22] fails, it will leave [the companies] either with a prospect of leaving the state, or more probably, doing less; phasing down their operations, having operations only in portions of the state, and it may induce them to adopt a franchise model in hopes of escaping liability under AB5.”
“I think it’s unlikely that they would leave the state altogether because it’s such an important and big market,” Gould said.
AB5 was written with a very broad brush and dozens of professions have since received exemptions, Walker noted. Meanwhile, a case, American Society of Journalists, et al v. Xavier Becerra, before the Ninth Circuit could upend AB5, Walker said, adding that the Independent Institute has filed an amicus brief in the case.
“Even if [Prop 22] failed, there is pending litigation before the Ninth Circuit, so we’ll see,” Walker said.