THIS MONTH TENS of thousands of Kaiser Permanente workers took to picket lines in multiple U.S. states launching a massive strike demanding pay raises and increased staffing. Unions representing Kaiser workers in August asked for a $25 hourly minimum wage, as well as increases of 7 percent each year in the first two years and 6.25 percent each year in the two years afterward.
The issue of workers’ rights does not impact permanent employees alone. Temporary contract workers are indispensable to the business models of technology-based high growth starts-ups. Yet, companies like Amazon, Instacart, DoorDash, Lyft, and Uber have long resisted extending benefits to part-time workers. In classifying their gig workers as independent contractors rather than employees, these high-tech employers are not obligated to provide basic protections and benefits such as minimum wage and unemployment insurance, thus depriving their workers of a bare minimum safety net.
According to the National Venture Capital Association (NVCA), venture capital (VC)-backed start-ups in the United States account for as many as 50 percent of gross jobs and an average 2.9 million net jobs annually between 1980 and 2010. Employment at VC-backed companies grew 960 percent from 1990 and 2020 at a pace eight times that of employment at non-VC-backed companies. Venture capital and private equity investors funding fast-growing start-ups are driven by ambitious profit margins and rapid global scale. High risk-reward ratios and pressures to drive up valuations in the face of rising interest rates and inflationary wage increases dictate cost-saving strategies such as contracting part-time workers to improve portfolio companies’ operational efficiency.
Yet, these costs appear minuscule in comparison with the cost of human lives that are at stake in the extreme. The case for restricting benefits became especially hard to defend during the COVID pandemic that exposed gig workers to dangerous working conditions on a day-to-day basis, highlighting the grave choice between sickness and starvation in the absence of a guaranteed hourly wage.
AB 5 changed the game
To say that policy efforts to address this issue are lacking would be amiss. Assembly Bill 5 (AB 5), a California law that went into effect on Jan. 1, 2020, made it more difficult to classify workers as independent contractors. Requiring gig workers to be put on their organizations’ direct payrolls, with commensurate wages, benefits, and protections unless they met the ABC rule or all three of its defining criteria to be considered contractors, the law aimed to broaden the pool of workers that is eligible for benefits.
Notwithstanding these efforts, the issue is far from resolved. Rideshare companies like Uber and Lyft, and delivery services such as Instacart, DoorDash, and Postmates have shown defiance against the law since it was implemented. Instead of complying, these five companies pooled over $200 million to get Proposition 22 on the ballot, hoping to get out from under the law. Prop. 22 received majority support from California voters in 2020, allowing companies that provide a delivery or rideshare service through an online app or platform to continue to categorize service providers as independent contractors rather than employees.
Rideshare and delivery service companies have fought California’s gig worker law, AB 5, since its implementation, pooling more than $200 million on a ballot initiative to get the law overturned.
To be sure, Prop. 22 provides specific benefits to drivers in California. These include a 120 percent base hourly compensation, quarterly health care subsidy of 50 percent to 100 percent of the cost of the average Affordable Care Act contribution for California premiums, and insurance and accidental death benefits to cover medical expenses and lost income in the event of on-the-job injury, as well as disability payments at 66 percent of the driver’s average weekly earnings from all network companies. Driver Rest allowing a break after logging in 12 hours on the companies’ platforms in any 24-hour period, and sexual harassment prevention training to protect app-based drivers, are also in place.
Yet, these provisions are deemed “inferior.” Companies like Uber and Lyft are alleged to have misled 40 percent of California’s “yes” voters into voting for Prop. 22 through aggressive and deceptive television and social media advertising falsely promising an increase rather than decrease in workers’ rights. Furthermore, they are accused of claiming solidarity with the Black Lives Matter as a mere tactic to distract attention and conceal their real motive of profiting from others.
Finally, the supposed “benefits” of Prop. 22 remain limited to California. Other states in the country that look up to California for how to manage changing work relationships have yet to adopt model legislation. While it remains to be seen if these states develop their own versions of Prop. 22 or, perhaps adopt a third classification of a “dependent contractor,” the ruling has been declared unconstitutional for protecting the economic interests of their high-tech network employers and curtailing the ability of app-based workers to unionize.
The role of the conscientious consumer
So, can the marriage of the high-growth start-up and gig worker be saved? Historic inequity and high unemployment facing the U.S. economy call for collective consciousness on behalf of all. The aftermath of Prop. 22 has mobilized app-based workers more than ever. Undermining big app-based companies’ top-down bargaining structures and campaigns, workers’ coalitions in Massachusetts and New York are cases in point.
App-based employers must remind themselves of the core premise of this contract. Hiring independent workers promotes flexibility and saves money. The millions being shelled to fund legislation and ballot initiatives to appeal the court’s decision in a bid to avoid accountability can be usefully diverted towards workers’ benefits.
The role of the conscientious consumer is center stage at a time when social value creation is becoming as important as the economic motive to gain legitimacy in the eyes of stakeholders. Let’s step forward to reward those employers who value their gig workers’ rights.
About the author
Sarika Pruthi is an Associate Professor of Entrepreneurship at San Jose State University and a Public Voices Fellow with the OpEd Project.