How Uber, Lyft won California bid to keep drivers as contractors

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Gig economy giants including Uber Technologies Inc., Lyft Inc. and DoorDash Inc. have won their effort to pass a hotly contested ballot measure that will exempt the companies from a state law requiring them to classify most of their workers as employees.

Uber and Lyft soared more than 14 percent in pre-market trading after California voters, in the most expensive ballot initiative in state history, approved a ballot measure exempting gig-economy companies from the state labor law known as A.B. 5. Almost 58 percent of voters were supporting the proposition versus 42 percent against, with more than 80% of the vote reported, according to the California Secretary of State’s Office.

Drivers for Uber, Lyft, DoorDash and the like will receive some new corporate perks but won’t be eligible for full employment benefits and protections as lawmakers had intended. Uber and Lyft alone will save more than $100 million a year on employment costs, according to one estimate.

The measure, Proposition 22, was critical for the ride-hailing industry in California and beyond. At stake in the vote was the future of many app-based work platforms, which use armies of independent contractors to deliver takeout and ferry passengers across town.

Uber, Lyft, DoorDash, Instacart and Postmates challenged the state law in court, but judges so far have ruled against them. Uber and Lyft recently lost an appeal, which would have narrowed their options if Prop 22 failed.

This fight’s importance was reflected in the ballot initiative’s financial contributions. DoorDash, Instacart Inc., Lyft, Postmates Inc. and Uber together spent $200 million on the campaign, making it the costliest ballot measure in state history. The “No on 22” camp, which was mostly funded by labor unions, only ever raised about a 10th as much.

Companies warned they could cut 80 percent of drivers, double prices and even leave California if they were forced to pay benefits including minimum wage, unemployment insurance, health care and workers’ compensation.

The measure’s approval means gig companies can continue using independent contractors to power their services. The workers will receive a new set of benefits, like a health insurance stipend and minimum hourly earnings, based on the number of hours they are actively working but not the hours spent waiting for each gig.

Reuters contributed to this report.

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Saurabh Shukla

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