Kamala Harris’s Uber Test
by Steven Hill, American Prospect, August 19, 2020
The vice-presidential nominee did little as a state and local prosecutor as Uber and Lyft rose to prominence. Now California wants to force drivers to be treated as employees, and Harris appears to be on board—for now.
Family gatherings at Kamala Harris’s house are about to get a lot more interesting. The presumptive vice-presidential nominee’s brother-in-law is Tony West, the chief legal officer and senior vice president for Uber Technologies. West also co-chaired Harris’s 2016 Senate transition team, and was third in command at Obama’s Department of Justice.
Uber and its fellow ride-hailing business Lyft are in a pitched battle against the state of California, as well as New York and other cities. A recent California law has overturned the companies’ independent contractor–based relationship with their drivers, and two lawsuits are seeking to enforce the regulation, which both Uber and Lyft, in typical Silicon Valley fashion, have ignored. Right now, the companies are badly losing these battles, and in a last-ditch effort, Uber, Lyft, and food deliverer DoorDash are spending $100 million on a California voter initiative for this November to overturn the gig worker law. The companies have even threatened to shut down operations across the state until the fate of the ballot measure is decided.
Even before the COVID pandemic, Uber and Lyft had been losing billions of dollars because of their predatory business model that massively subsidizes every passenger ride in their monopoly bid to undercut the competition. Having a friend in the White House would be a huge asset to Uber. And Harris’s record regarding ride hailing has shown her Janus-like ability to talk out of both sides of her conflicted temperament, appearing as either an overly cautious flip-flopper or a pragmatic politician, depending on one’s point of view.
Uber’s Rise, Harris’s Silence
Harris was San Francisco’s district attorney (2004–2011) and attorney general of California (2011–2017) during the period of Uber and Lyft’s launch in San Francisco and rapid rise. In a country with abysmal public transportation (outside New York City) and spotty taxi service, the ride-hailing companies were welcomed by many younger urban dwellers as a reliable transportation alternative. While the percentage of Americans who use ride hailing has remained relatively small (around 15 percent), it has still amounted to a large enough consumer pool to generate billions in revenue for Uber and Lyft.
No place was more welcoming to this new industry than California. As attorney general, Harris did nothing to scrutinize, much less slow down, this juggernaut. In fact, between her and Gov. Jerry Brown, who oversaw the passage of the first ride-hailing state law in the country, California actively assisted ride hailing’s rise. The California law, which became a national model, included a state preemption that handcuffed the ability of local governments to establish their own laws for ride hailing, as they were already doing for traditional taxis.
This turned out to be a terrible mistake. It set the stage for the destructive business model that soon swamped city after city. It did not take long before ride hailing’s familiar features became apparent. The companies flooded the streets with cars, resulting in dramatically increased traffic congestion, along with more pollution and carbon emissions. New York City published a report called “Empty Seats, Full Streets,” which showed that a third of drivers have empty cars as they circle, looking for a passenger and burning up hydrocarbons. Too many drivers meant not only more traffic and emissions, but not enough work for all of the drivers. Many do not even make minimum wage after driving expenses are deducted from their gross incomes.
Making matters worse, Uber and Lyft subsidize more than half the cost of each and every ride, in an attempt to gain a market monopoly. In past decades, when federal regulators still cared about things like “predatory pricing” and stopping monopolistic business models, this would have been prevented. Instead, traditional taxi companies and livery drivers have been driven to the verge of bankruptcy, resulting in a rash of suicides in 2018 among drivers in New York City. Airport shuttle companies have been driven out of business, and public transportation has taken a major hit. Even before the pandemic, public-transit ridership in most major cities had declined, as commuters opted for half-priced Uber and Lyft over the mass ridership experience of public transportation. One of the most ambitious studies of ridesharing impacts conducted, from researchers at the University of California, Davis’s Institute of Transportation Studies, found strong evidence that ridesharing results in an aggressive rise in the number of trips made and miles driven in an auto, as well as a pronounced reduction in the use of mass transit, and an increase in carbon emissions.
For the small minority of people who have used Uber and Lyft’s subsidized rides, most of them younger, college-educated, better-off Americans (their use is double the rate of less-educated, lower-income people), this transportation option has been helpful. But for the vast majority who do not use these companies’ services, and who ride the bus or drive personal vehicles stuck in congested traffic, ride hailing’s legacy has been decidedly negative. In short, ride hailing has been bad for most drivers, bad for the environment, bad for congestion and traffic flow, and bad for public transportation.
All of these impacts occurred on Kamala Harris’s watch. Harris’s longtime silence on major policy issues has been widely noted. It fed into her critics’ main complaint that she was a triangulating Democrat with little in the way of core beliefs that might get in the way of her upward political career.
Harris’s Hesitation Over Labor Law in California
By early August 2019, many fed-up ride-hailing drivers, labor advocates, and elected representatives in California were on the cusp of passing the most ambitious labor law in several decades, known as Assembly Bill 5, or “the gig workers bill.” AB-5 sought to lock into law a 2018 California Supreme Court decision called Dynamex, which made it harder for companies to classify workers as independent contractors. AB-5 established a three-pronged test that says workers are employees if they perform tasks under a company’s control, or their work is integral to the company’s business. While the bill affects many different types of gig work, the clear target of the bills’ sponsors was the giant ride-hailing companies and their hundreds of thousands of California drivers.
As a presidential candidate, suddenly Harris found herself called upon to pick a side in this battle. Weeks before, Sens. Elizabeth Warren and Bernie Sanders (both fellow presidential candidates) had taken a very public stand in favor of AB-5. The California media began hounding Harris about her position. Still, Harris equivocated until late August 2019, when she finally announced her support. The late endorsement was not exactly a “Profiles in Courage” moment, since at that point it was clear that the bill had overwhelming backing; it passed the state legislature two weeks later with over 70 percent support. Critics partly attributed Harris’s slow response to her relationship to Tony West, who is married to Maya Harris, the senator’s sister and campaign manager.
AB-5 took effect on January 1, 2020, but in typical Silicon Valley fashion, Uber and Lyft ignored implementing it. In the middle of Uber’s legal strategy was Tony West. Despite Uber being in the taxi business, the law did not actually apply to the company, West insisted, because “Drivers’ work is outside the usual course of Uber’s business.” How’s that? Uber is “a technology platform for several different types of digital marketplaces,” said West.
Uber had long promoted itself as a technology rather than transportation business. Founder Travis Kalanick changed his company’s name in 2010 from UberCab to just Uber, after receiving a cease-and-desist letter from the San Francisco Municipal Transportation Agency charging it with operating an unlicensed taxi service. Later, Kalanick changed the name again to Uber Technologies, when he realized the laws for software development were much less rigorous than for transportation companies. Uber also tried making this argument to the European Court of Justice and various EU member states during the company’s regulatory battles there, but in Europe this argument did not pass the laugh test. The same thing happened in the U.K., where Uber had its operating license revoked in London, one of its largest global markets, and is currently facing a legal battle at the U.K. Supreme Court over driver misclassification.
Commenting on what’s best for Uber’s poor, underpaid, and often minority and immigrant drivers, the Harvard- and Stanford-educated West claimed, “Drivers don’t want to be employees.” Instead, he has advanced a vague company proposal for a porous, underfunded portable safety net for its drivers. When asked by the San Francisco Chronicle if his controversial work for Uber caused “any dissent” at home with Sen. Harris or her sister, West said: “No.”
If Biden-Harris wins the White House, suddenly they face another dilemma: If AB-5 is good for California, why isn’t it good for the entire nation?
The fate of ride hailing will be a real test of Harris’s actual commitment to the economic-justice issues she painstakingly avoided during the first part of her political career. In one positive sign, both Harris and Joe Biden have urged California voters to reject Proposition 22, the $100 million ballot measure to overturn AB-5 and allow drivers to remain independent contractors. That’s a lot of money to spend against a law that you claim does not even apply to you.
Uber sought an injunction against the implementation of AB-5, but a judge denied that last February. Shortly thereafter, California Attorney General Xavier Becerra filed a lawsuit to compel Uber and Lyft to follow the law and convert their drivers to employees—something Harris never did as attorney general, despite the underpinnings of the then-existing law that led to the Dynamex decision. On August 10, a judge ruled that Uber and Lyft must immediately comply with AB-5, emphatically stating that it is “obvious” drivers are “central, not tangential, to Uber and Lyft’s entire ride-hailing business.”
Several days after that ruling, the California state labor commissioner filed two new lawsuits alleging that ride-hailing drivers have long been misclassified as independent contractors and denied fair wages and benefits by the ride-hailing companies. One study by UC Berkeley’s Center for Labor Research and Education found that Uber and Lyft would have had to pay more than $400 million over the last five years into California’s unemployment insurance fund if their drivers were classified as employees. Now the labor commissioner is seeking minimum-wage back pay, overtime, rest and paid sick leave compensation, and reimbursements for business expenses. The price tag to Uber and Lyft could be enormous.
The companies still have plenty of cash on hand, but their last desperate hope is the passage of Proposition 22 in this November’s election. They are threatening to shut down their California operations, in essence putting a gun to the head of their California users—“Vote for Prop 22, or else.” Uber and Lyft tried the “pulling out” threat once before over an unfavorable ballot measure in Austin, Texas, and when Austin voters sent them packing, the companies pulled out but eventually came back. Becerra was unmoved by Uber’s threat to leave, retorting, “Any business model that relies on short-changing workers in order to make it probably shouldn’t be anywhere, whether California or otherwise.”
These companies could use some powerful friends right now, and in the past they have hired high-level Obama staffers, such as political strategist David Plouffe. Will sister-in-law Kamala lend a hand? That seems unlikely in the short term, at least not in any public way before the election. But if Biden-Harris wins the White House, suddenly they face another dilemma: If AB-5 is good for California, why isn’t it good for the entire nation? Or at least the bigger cities? Will a Biden-Harris administration push a national version of AB-5?
Much is at stake in this battle. If California prevails, and its law spreads to other states or even nationally, Uber and Lyft’s extreme financial losses either could result in bankruptcy, or their business model will be forced to change radically. Ride hailing should be regarded as one of a number of canary-in-the-coal-mine indicators of how a Biden-Harris administration will govern.