© Reuters/Mike Blake FILE PHOTO: A sign marks a rendezvous location for Lyft and Uber users at San Diego State University in San Diego
By Tina Bellon
(Reuters) -Uber, Lyft and other gig-economy companies face a new challenge from the Biden administration to their use of contract workers, but as they gear up for a fight in Washington they could turn to a lobbying playbook that helped them score a decisive win against California regulators last year.
U.S. President Joe Biden campaigned on the promise of providing legal protections and benefits to gig workers, who as independent contractors generally have no access to unemployment insurance, sick pay and health insurance. U.S. Labor Secretary Marty Walsh said last week: "A lot of gig workers should be classified as employees."
In Congress, Democratic lawmakers are pushing a union-supported labor bill, the PRO Act, that in part is modeled after a California law called AB5 that reclassified most gig workers as employees.
AB5, however, is no longer the law in California for ride-hail and food delivery workers, while it remains in effect for other freelancers. Uber Technologies Inc, Lyft Inc, DoorDash Inc and Instacart, whose business model relies on low-cost flexible labor, mounted a $205 million campaign that overturned the law for the industry last November.
Among the tactics honed in the California fight, the gig-work companies used their apps to reach out to voters and drivers through messages, emails, mailed leaflets, billboards, radio and online ads. They also urged workers on their platforms to speak out against AB5.
The companies threatened an end to ubiquitous food-delivery and ride-hail services many consumers have gotten used to during the pandemic if drivers were classified employees.
The looming fight over the status of gig-economy workers comes amid a wider debate over business regulation. The federal government exercised a light hand in regulating Uber, DoorDash and other digital-economy companies as they redefined traditional definitions of work, communications or retailing. Now, Democrats and Republicans in Washington, for different reasons, are calling for the government to exercise more control over one-time startups that dominate significant sectors of the economy.
Uber, Lyft, DoorDash and Instacart so far this year have spent a combined $1.3 million to lobby the Biden administration and members of the U.S. House and Senate, according to data from the Center for Responsive Politics. In 2020 they spent some $5.7 million, more than half of which came from Uber.
LOBBYING PUSH
Less than two weeks after Biden won the White House in November, companies banded together to form the App-Based Work Alliance, a Washington-based advocacy group. The group is now promoting statements of drivers and food-delivery workers saying they want to remain independent contractors, and do not want the PRO Act because they fear it would deprive them of opportunities to earn money on their own schedule for a few hours a week.
The companies cite surveys to argue the majority of their mostly part-time workers do not want to be classified as employees.
While the surveys show massive support for remaining independent contractors, they also follow years of threats by the companies of eliminating work opportunities if workers become employees. Some of the surveys are co-written by researchers with company ties, sponsored by the companies or completed with unscientific methodologies by a blogger who sent out emails and social media posts.
For example, one study by the National Bureau of Economic Research listed Uber's chief economist, Jonathan Hall, as a co-author, and a 2020 survey of 1,000 drivers by Benenson Strategy Group and GS Strategy Group was paid for by Uber. Uber said that while it paid for the poll, the survey was conducted by reputable research groups.
In California, the gig companies did not simply oppose any changes to their employment practices. Instead, they campaigned for compromise, advocating changes to labor laws to allow workers to remain contractors while also receiving more modest benefits than required for employees.
DoorDash said its workers on average work just four hours a week, while Uber said 37% of its U.S. drivers and 58% of its delivery people averaged fewer than 10 hours per week in the last quarter of 2020. The companies say those part-time gigs would become impossible under an employment model.
But Uber data from the fourth quarter of 2019, before the pandemic, also showed that California drivers working 25 hours and more per week completed more than 60% of all trips in the state, suggesting that full-time drivers complete the bulk of the work.
DRIVER ADVOCACY
By Tina Bellon
(Reuters) -Uber, Lyft and other gig-economy companies face a new challenge from the Biden administration to their use of contract workers, but as they gear up for a fight in Washington they could turn to a lobbying playbook that helped them score a decisive win against California regulators last year.
U.S. President Joe Biden campaigned on the promise of providing legal protections and benefits to gig workers, who as independent contractors generally have no access to unemployment insurance, sick pay and health insurance. U.S. Labor Secretary Marty Walsh said last week: "A lot of gig workers should be classified as employees."
In Congress, Democratic lawmakers are pushing a union-supported labor bill, the PRO Act, that in part is modeled after a California law called AB5 that reclassified most gig workers as employees.
AB5, however, is no longer the law in California for ride-hail and food delivery workers, while it remains in effect for other freelancers. Uber Technologies Inc, Lyft Inc, DoorDash Inc and Instacart, whose business model relies on low-cost flexible labor, mounted a $205 million campaign that overturned the law for the industry last November.
Among the tactics honed in the California fight, the gig-work companies used their apps to reach out to voters and drivers through messages, emails, mailed leaflets, billboards, radio and online ads. They also urged workers on their platforms to speak out against AB5.
The companies threatened an end to ubiquitous food-delivery and ride-hail services many consumers have gotten used to during the pandemic if drivers were classified employees.
The looming fight over the status of gig-economy workers comes amid a wider debate over business regulation. The federal government exercised a light hand in regulating Uber, DoorDash and other digital-economy companies as they redefined traditional definitions of work, communications or retailing. Now, Democrats and Republicans in Washington, for different reasons, are calling for the government to exercise more control over one-time startups that dominate significant sectors of the economy.
Uber, Lyft, DoorDash and Instacart so far this year have spent a combined $1.3 million to lobby the Biden administration and members of the U.S. House and Senate, according to data from the Center for Responsive Politics. In 2020 they spent some $5.7 million, more than half of which came from Uber.
LOBBYING PUSH
Less than two weeks after Biden won the White House in November, companies banded together to form the App-Based Work Alliance, a Washington-based advocacy group. The group is now promoting statements of drivers and food-delivery workers saying they want to remain independent contractors, and do not want the PRO Act because they fear it would deprive them of opportunities to earn money on their own schedule for a few hours a week.
The companies cite surveys to argue the majority of their mostly part-time workers do not want to be classified as employees.
While the surveys show massive support for remaining independent contractors, they also follow years of threats by the companies of eliminating work opportunities if workers become employees. Some of the surveys are co-written by researchers with company ties, sponsored by the companies or completed with unscientific methodologies by a blogger who sent out emails and social media posts.
For example, one study by the National Bureau of Economic Research listed Uber's chief economist, Jonathan Hall, as a co-author, and a 2020 survey of 1,000 drivers by Benenson Strategy Group and GS Strategy Group was paid for by Uber. Uber said that while it paid for the poll, the survey was conducted by reputable research groups.
In California, the gig companies did not simply oppose any changes to their employment practices. Instead, they campaigned for compromise, advocating changes to labor laws to allow workers to remain contractors while also receiving more modest benefits than required for employees.
DoorDash said its workers on average work just four hours a week, while Uber said 37% of its U.S. drivers and 58% of its delivery people averaged fewer than 10 hours per week in the last quarter of 2020. The companies say those part-time gigs would become impossible under an employment model.
But Uber data from the fourth quarter of 2019, before the pandemic, also showed that California drivers working 25 hours and more per week completed more than 60% of all trips in the state, suggesting that full-time drivers complete the bulk of the work.
DRIVER ADVOCACY
Gig Workers Rising, a group of workers that advocates for greater benefits and says it does not receive financial support from labor groups, in a statement dismissed the companies' compromise proposal.
"(The proposal) is not a blueprint for workers' rights, it's a game plan for gig corporations and investors looking to maximize their profits," the group said in a statement.
The defeat of AB5 for app-based gig workers in California was a blow to organized labor groups, California's Democrats and even Biden and Vice President Kamala Harris, who had urged the state's voters to reject the gig industry's proposal.
Though AB5 is gone, gig workers in California now have access to some benefits, including healthcare subsidies, accident insurance and minimum pay while passengers are in their car. Those benefits are significantly less costly to the companies than employee benefits and labor groups say drivers do not know how to access them.
As the fight over gig-worker rights heats up on the national level, the companies could deploy similar measures.
"Right now there's no call for action, but if that became the case, for example if a real piece of legislation or ballot measure was put forward, we'd certainly activate our driver base," a Lyft spokeswoman said.
Uber and DoorDash said they had no specific plans for an outreach campaign as of now. Uber in August sent an email to all its drivers nationwide, outlining its proposal for a change in law to combine independent contractor status with some benefits.
(Reporting by Tina Bellon in Austin, TexasEditing by Matthew Lewis)
(Corrects to reflect that AB5 is no longer the law in California for ride-hail and food-delivery workers, instead of that AB5 is no longer the law in California for anyone, paragraph 5; also corrects paragraph 20 to reflect that AB5 was defeated "for app-based gig workers.")
Uber and Lyft will outperform despite US Labor Secretary's comments that gig workers should be treated as employees, Wedbush says
© Provided by Business Insider The future of Uber and Lyft drivers - and the companies - will likely hinge on a hugely important vote in California this November. Brian Snyder/Reuters
Wedbush's Dan Ives maintained his "outperform" ratings for Lyft and Uber in a note to clients on Sunday.
The managing director of equity research said the rideshare giants are ideal reopening stocks.
Based on checks with industry legal experts, Ives believes federal involvement in gig workers' status is "highly unlikely."
Wedbush Securities' Dan Ives maintained his "outperform" ratings on shares of Uber and Lyft in a note to clients on Sunday.
The managing director of equity research said he expects the rideshare services to take advantage of a "massive rebound in demand" and show a "healthy profitability trajectory" in their upcoming first-quarter earnings reports.
Ives holds a $76 price target for shares of Uber and an $85 price target for shares of Lyft.
Ives' Uber price target represents a potential 39% jump in share prices from Friday's closing price while his price target for Lyft represents a potential 52% surge
Shares of Uber and Lyft fell last week after US Labor Secretary Marty Walsh said "in a lot of cases gig workers should be classified as employees" in an interview with Reuters.
Uber and Lyft rely on labor from "gig economy" workers to run their businesses. A changing classification of gig workers to employees would mean increased costs for the rideshare companies.
Ives said that despite a sell-off after the news broke, based on discussions with experts on labor law issues, he believes "federal involvement in this issue would be very complex and highly unlikely without legislation changes, which at minimum would take significant time to play out."
The managing director added that Uber and Lyft have been proactive in pushing the gig economy model and he believes they will ultimately find a "middle ground approach" over the coming years.
Ives also noted Lyft's recent sale of its Level 5 autonomous vehicle unit to Toyota for $550 million will help accelerate its path to profitability and Uber's new delivery and mobility upgrades should bolster its revenues during the beginning of another "roaring 20's."
Overall, Ives appears unfazed by the recent comments from the US Labor Secretary and remains very bullish on the two rideshare giants, calling them a "pure bounce-back demand" play for investors.
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