Prop 22, Attacks on the New Deal, and What Biden Can Do About It All

It’s been a tough few weeks for gig economy workers, who were already at the bottom of the economic totem pole:

Unlike many overt abuses of corporate power, these are not fait accompli. In fact, President Joe Biden can actually do something about them. He just has to empower his National Labor Relations Board to take action on Prop 22, one of the biggest under-the-radar threats to working people and democracy today.

What Is Prop 22?

Two events fundamentally rewired the American economy last year. The first, obviously, was COVID-19, which continues to rage and roil what was an already grossly unequal system. The second, the passage of Proposition 22 in California, went a bit under the radar but seriously compounded the shifts instigated by the pandemic.

When the pandemic blossomed in March 2020, businesses shut down and employers began massive waves of furloughs that became layoffs. Desperate for any sort of income, hundreds of thousands of people joined an already overcrowded, underpaying gig economy; within the first few months of the outbreak, grocery delivery apps like Instacart and Amazon Flex added over 550,000 workers, who were forced to put themselves at the mercy of algorithms and assume all risk and expenses in exchange for low wages and no security. In 2019, one study showed that drivers were making an average of $9/hour after all the expenses that they had to cover. Even more competition made it even worse.

A few years ago, lawmakers in California decided to do something about the garbage compensation that Uber, Lyft, Instacart, DoorDash, and other gig companies offered their workers. In 2019, Gov. Gavin Newsom signed a law known as AB 5, which created a standardized “ABC” test to determine whether someone is a full-time worker and therefore owed certain benefits and pay from their employer. But “laws are only as good as their enforcement,” says Veena Dubal, a law professor at the University of California, and the gig economy companies decided that they didn’t feel like obeying AB 5.

“Mom and pop companies know that they cannot weather a lawsuit, so they are going to be in compliance,” Dubal tells Progressives Everywhere. “But companies like Uber and Lyft, they don’t have a viable business model and they’re hemorrhaging millions a year, but because of all of their venture capital funding, they can afford to say ‘go ahead and sue us.’”

Tony West, a former Obama assistant attorney general, headed up Uber’s legal strategy, which included not just disobeying the law, but in cooperation with the other app-based gig economy companies, buying their own law. Anthony Foxx, Obama’s former Secretary of Transportation, heads up Lyft’s policy team and was also involved in the plan. So as the state’s lawsuit against the companies snaked its way through the California courts system, the Silicon Valley titans went all-in on making it irrelevant with a ballot initiative known as Proposition 22.

Dubal was a big part of the scrappy, very outspent campaign to defeat the initiative, which among other things carved driving-based gig employers an exemption from AB 5. Uber, Lyft, Instacart, DoorDash, and similar companies wound up spending at least $200 million and turned their apps into propaganda misinformation machines.

“The apps would ask drivers whether they supported Prop 22, and what are you going to say? They’ve been flooding you with misinformation, and even if you still don’t support it, are you going to be deactivated if you don’t say yes?” Dubal points out. “Then when a passenger they got into the car, a little image would pop up on their phone that said that that driver that they’re about to ride with supports Proposition 22.”

Most of the rhetoric around the proposition revolved around giving drivers a higher minimum wage and healthcare benefits… but left out the fact that they were far less generous than what’s generally required by law, not to mention that they would be almost impossible to earn. For Uber drivers, for example, only time spent actually driving people counts towards the time accrued toward being considered full-time. Most drivers spend most of their time looking for passengers, especially with such a saturated market, and none of that time counts toward the total.

Just look at this misleading ad for a taste of what they pulled:

As a result, most California voters were led to believe that they were helping drivers; even the New York Times’ opinion section editors were deceived, as they kept taking out Dubal’s mentions of the minimum in her most recent op-ed, as they overlooked the fine print “engaged” clause in the proposition.

Polls now show that a majority of people regret its passage. Had it not passed, the California State Supreme Court’s decision that those companies were indeed subject to AB 5 would have settled the issue. Instead, a very dangerous precedent has been set — especially because it will take an unprecedented, probably unconstitutional seven-eighths margin of the state legislature to repeal it.

The Bigger Picture

The individual law itself is more dangerous than it sounds. It carved out an exception for all delivery-based jobs, which can be exploited by companies all along the supply chain. Uber is already expanding into the pharmacy delivery game, Amazon continues to acquire businesses to staff with its exploited drivers, and industries like trucking and long-haul driving are in the crosshairs.

While Prop 22 only governs California, there is no state more influential on the functioning of the national economy, so trends very often spread eastward. And as Dubal says, the proposition “created a blueprint other corporations can now follow, where you can buy your own law, and then seal yourself off from any kind of scrutiny, amendments, or changes by adding the seven-eighths provision that they added into the proposition.”

The ride-share companies have already indicated that it plans to export the model — Lyft’s CEO literally called it a “model for other states” — and while not every state has a ballot initiative process, as we discussed last week, many red states where people might be sympathetic to the “freedom” rhetoric, do have robust initiative systems.

And it’s not just about drivers, either. The bigger concern is that really any industry with enough clout will be able to ignore laws and then push their own pre-written legislation.

“This proposition is what corporations have been trying to accomplish since the New Deal was passed in the 1930s,” Dubal says. “They are trying to get out from underneath having to pay workers a minimum wage. This will become normalized very quickly and then what will happen is that once we accept that there are logistics workers that don’t make a minimum wage, that don’t have access to overtime or access to health insurance or unemployment insurance that or workers compensation, then you’ll have new companies springing up that are in health care, education, restaurants, programming, who then get to benefit from the Proposition 22 system.”

So What Can Be Done About It?

This leads us to the ultimate question: Will Biden take action? Does he want to? During the campaign, he touted his support for the PRO Act, a House Democratic proposal that would make AB 5 a national law, but narrow majorities and a current unwillingness to nuke the filibuster make that legislation a heavy lift in the Senate.

It’s also a concern that there are so many former Obama officials involved with these app companies. Along with West and Foxx, Uber also hired Obama campaign architect David Plouffe and even had Eric Holder on contract for a time.

So first, as Sen. Elizabeth Warren says, personnel is policy. Biden has nominated a solid team at the Department of Labor (Secretary-nominee Marty Walsh and Deputy Secretary-nominee Julie Su). At the same time, it’s unclear just how much he’ll want to regulate Big Tech — Attorney General Merrick Garland reportedly wants a former Facebook lawyer to be the top antitrust official, which is disconcerting. Then again, Lina Khan, a top name in antitrust, is a frontrunner for a role on the FTC.

Dubal outlined a number of steps that Biden’s administration can unilaterally take to potentially reverse the impact of Prop 22. Her recent op-ed in the New York Times offers a glimpse at a number of them, which we’ll go over here, too.

In its final few weeks, the Trump Department of Labor issued memos that narrowed the definition of workers who qualify for overtime and minimum wage. The memos were filled with legal analysis that Dubal calls poorly written and perhaps easily rescindable due to its shoddiness; Biden’s executive order to freeze late Trump memos and rules for review already puts his administration on its way to completing that key first step.

Dubal also suggests that the Department of Labor could also write a legal opinion saying that it believes that Prop 22 is in violation of the Fair Labor Standards Act, giving the Attorney General an opportunity to take action.

“Proposition 22 flies in the face of the Fair Labor Standards Act because Congress did not intend for app-based workers to be exempt from basic minimum wage and overtime laws when they passed it,” she says. “The law applies to all workers who are not explicitly excluded.”

As we outlined last week, ballot initiatives have become another battlefield, and this is the biggest one of them all.

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