Coronavirus slowed Uber and Lyft — but not their big-money efforts to undo AB 5

The gig economy companies added $267,000 to a California campaign that seeks to rewrite the rules for contract workers.

Driveshare workers hold signs supporting AB5

Uber and Lyft drivers protested in Los Angeles in early February, saying they worked long hours without employee benefits.

Photo: Ronen Tivony/Echoes Wire/Barcroft Media via Getty Images

As the San Francisco Bay Area locked down, Silicon Valley's political machine kept churning. On March 17 — the day authorities ordered millions of people to shelter in place to limit the spread of coronavirus — Uber chipped in $21,960 to a $110.6 million war chest it has amassed with fellow gig-economy heavyweights Lyft, Instacart, DoorDash and Postmates, state records show.

Their goal: to convince California voters to support a November ballot initiative that would reverse a new state law, Assembly Bill 5, that sought to require legions of contract drivers and shoppers to be paid and treated as full-time employees.

The contribution, though modest, was one of 10 that Uber and Lyft made since the first California cases of COVID-19 appeared in late January, totaling more than $267,000, records show. The payments are an indicator that one of the defining policy fights of the tech industry — which could determine the viability of an entire sector and the fate of millions of workers — is likely to get wrapped up in a swirl of money and politics, as voters deal with the fallout of the pandemic and choose a new president.

Everyone agrees that the turn to social distancing has fundamentally changed the battle over gig work, now that on-demand delivery has emerged as an essential service in a global crisis. What Uber, Lyft and their allies are betting is that, with their war chest, they can win with a message that their business model built on low labor costs has been vindicated — and that they can parlay a victory into gains in other states.

But lawmakers and a new wave of gig worker advocacy groups that have supported AB 5 say the lesson of the lockdowns is just the opposite, that vital workers need to be treated as such. With a louder voice and increasing leverage, they say gig companies should focus on worker safety, comply with the new law and give up the ballot measure — and perhaps even liquidate the campaign fund to give workers raises.

"COVID-19 has made it very clear that this is a tenuous situation," said Rey Fuentes, an attorney with the Oakland office of Partnership for Working Families, a labor advocacy group. "It really puts in stark relief the companies' continued reliance on a business model that is now contrary to law in many states."

Gig companies contend that the economic rationale behind their campaign to keep workers classified as contractors is clearer than ever. Some need additional bodies all over the country — up to 300,000, in the case of Instacart — and laid-off workers can turn to their platforms for fast cash.

"We've seen the stuff that labor's been putting out, and we just fundamentally disagree on every front," said Stacey Wells, campaign spokesperson for the coalition supporting the ballot measure. "Employment is not going to work for the vast majority of people who drive delivery and ride-share."

Whether gig workers win full or partial benefits like paid sick leave, health care and overtime pay rests not only with the ballot measure but a web of court cases, administrative wage claims, and challenges from local officials. In the meantime, as competing petitions and social media campaigns spread from the rival camps, workers must rely on emergency provisions like hand sanitizer and limited paid leave if they can produce a positive COVID-19 test.

"AB 5 was obviously a watershed moment, but that struggle's not over," said San Francisco Supervisor Gordon Mar, a former labor organizer who recently authored a resolution calling on city and state attorneys to bring an injunction to force gig economy companies to hire contractors as employees. "In the current health crisis, it's even more urgent."

Following the money

In all, Uber and Lyft gave $267,283 from late January through mid-March to support the "Protect App-Based Drivers and Services Act," according to filings with the California Secretary of State. Lyft made the biggest contribution in that period with a $70,000 payment on March 1, just as Gov. Gavin Newsom started warning of looming shortages of protective equipment like masks.

The campaign kicked off last fall, before AB 5 was officially signed into law, when Uber, DoorDash and Lyft each loaned $30 million to the campaign. Instacart and Postmates contributed another $10 million apiece.

The campaign has also had a busy start to 2020 on the ground. In late March, while the rest of California was sheltered in place, the gig company coalition submitted 1 million signatures to election officials who are now evaluating whether they achieved the required 623,212 valid signatures. The signatures were gathered in January and February by 1,000 volunteer ride-hailing drivers as well as paid petitioners, Wells said. Despite the unexpected uncertainty with the virus, she said the campaign is continuing as planned.

"Most of the public doesn't really start paying attention until Labor Day, so we're still doing what we would be doing," Wells said. "There's still a lot happening."

Uber and Lyft did not answer specific questions from Protocol about their support of the ballot measure, or whether they plan to continue campaign contributions amid reports of mounting financial pressure. Last week, The Information reported that Uber's passenger revenue was poised to plummet due to the lockdowns to about half the monthly $800 million the company generated this time last year. Uber reported $10.9 billion in cash on hand last year; Lyft said it had $358 million.

The California ballot measure is part of a broader political strategy for the companies. Uber CEO Dara Khosrowshahi successfully lobbied President Trump and federal lawmakers to include contract workers like Uber's 1.3 million drivers in a taxpayer-funded stimulus bill promising increased unemployment benefits. There should be a "third way" for gig workers to access some protections, Khosrowshahi argued, as opposed to strict employee classification requirements.

"It would radically change Uber's core service and business model," Khosrowshahi wrote to Trump, "and would ultimately lead to restrictions on access to income for millions of people looking for this type of work."

Any drastic change to Uber or Lyft's cost structures would affect consumers who have gotten used to cheap rides. Though comprehensive data on gig economy pay and employment is hard to come by, industry estimates peg the cost of contractors at 20% to 30% less than employees.

For people like Carlos Ramos, a 38-year-old military veteran and Lyft driver in Bakersfield who previously advocated for AB 5 with Gig Workers Rising, the promised financial relief has yet to materialize. In mid-March, he stopped commuting to the Bay Area, where he often stayed with family for days at a time so he could pick up higher fares near San Francisco. He felt fine but worried about what he might bring home to family members who live nearby.

"I really started to think about the fact that people over 60 are dying," Ramos said. "My mother just turned 60 two weeks ago."

Ramos said he drives a Mercedes C300 sedan because it makes him eligible for the company's better-paid Lyft Lux rides. But without fares coming in, he said, the car is just one of many financial stresses as he waits for either a government stimulus check or the unemployment benefits he applied for.

"We're in this holding pattern," Ramos said. "That's been very indicative of this whole thing. You see it on the horizon, but you don't have anything at your front door."

The gig game plan

Gig economy companies are far from the first to try to shift the burden for costly employee benefits to their workers or taxpayers. Service sector employers like Walmart and McDonald's have been criticized for paying hourly workers minimum wage while they rely on food stamps, government health plans and other safety net programs.

But the pressure on gig work employers has magnified in recent weeks as labor groups organized strikes against companies including Instacart and Amazon. The groups, most with varied ties to more established labor unions, include Gig Workers Rising, Rideshare Drivers United and We Drive Progress.

The latter group, which directs inquiries to an email address for the Service Employees International Union, listed demands on its website and asked visitors to send them via an online form directly to executives at companies like Uber. In addition to liquidating the ballot measure fund, We Drive Progress called on Uber and Lyft to comply with AB 5, begin paying into California's state unemployment fund, and guarantee paid sick leave for drivers with any symptoms of COVID-19 at a minimum $15 per hour and 30 hours per week.

"At this stage it's really challenging, because the gears of the legal system move far slower than our imagination," said Fuentes of Partnership for Working Families. "This is absolutely a long-term fight."

Labor advocates have won court battles, including a San Diego injunction against Instacart, though that ruling was not enforced during ongoing appeals. In recent months, individual drivers have also begun filing wage claims with local labor boards, and city attorneys, the state attorney general or investigative agencies like those within the state Department of Industrial Relations may bring additional enforcement actions.

But the ballot measure could be a game-changer for the companies. The measure — which would have companies issue stipends for health care and provide some access to worker's compensation, but bar workers from unionizing or being classified as employees — could not be amended in the future without a seven-eigths supermajority of the state legislature.

"That's why they're spending $110 million," Fuentes said. "It's solving the problem."

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Wells, the campaign spokesperson, said the high bar to amend the bill was added to prevent the state's Democratic majority from undoing "the will of the voters on a whim." For now, she said, the deep-pocketed campaign continues to operate over Zoom calls, and she isn't worried about future fundraising prospects.

"We're comfortable where we are right now," Wells said. "The whole world is in a different place than where it was 30 days ago."

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