Following the labor movement’s defeat by Uber over gig drivers in California’s Proposition 22, key unions appear ready to imitate a weak version of Germany’s sectoral bargaining as a desperate compromise.
In September 2019, California passed a law, known as AB 5, that gave gig workers and other types of freelancers/solo self-employed workers the legal standing of employees. As I previously reported for Mitbestimmungsportal, this law was one of the most important pro-labor laws to pass in the United States in several decades, as it reined in app-based businesses that profited from bogus self-employment and worker misclassification. And it launched efforts to copy this legislation in other US states.
Unfortunately, that news was too good to last. The following year in November 2020, AB 5 was severely weakened when California voters passed Proposition 22, a ballot initiative that implemented a new state law which exempted app-based taxi and delivery drivers from AB 5’s groundbreaking provisions. Ride hailing businesses Uber and Lyft, along with food deliverers DoorDash, InstaCart and Postmates, together spent an astounding $205 million to pass this ballot measure. Unions could muster only $18 million to counter the Silicon Valley war chest, making it a David and Goliath battle.
The platform companies used threats to drivers (“goodbye jobs”) and other distorted claims in an overwhelming media blitz to misinform and mislead California voters. AB 5 remains in effect for other types of freelancers and “independent” contractors, but the exemption of ride hailing drivers removed the largest sector of workers from the law’s coverage.
From regular employees to “independent contractor-plus”
Now, Silicon Valley’s success over Proposition 22 is having ripple effects that may impact other occupations, as well as other nations like Germany and EU member states. Uber and its allies’ victory has unleashed a “race to the legislatures” by Silicon Valley companies. The gig labor platforms are looking to quickly replicate this success in many other US states, as well as at the national level and also in other countries. Uber CEO Dara Khosrowshahi has said his company is calling this new model “IC+,” for “independent contractor-plus,” and he intends to advocate for it around the world.
IC+ offers to workers a few more benefits than typical gig work, though with a lot of conditions attached that will likely result in most drivers never qualifying for those benefits. For example, Prop 22’s “minimum wage” has been estimated by the University of California-Berkeley Labor Center to provide an effective average wage as low as $5.64 an hour, after driving expenses are deducted and other conditions are fulfilled (compared to a minimum wage in most major cities of $15 per hour). The Uber approach abolishes the “regular employee” classification that AB 5 gave to these drivers, and fails to provide the basic protections of real employment.
Veena Dubal, a labor law professor at UC Berkeley’s Hastings College of the Law, says this is not in any way an ‘independent contractor-plus’ model. “Like Proposition 22’s political advertising, Khosrowshahi’s framing is inaccurate, misleading and dangerous,” she says. Robert Reich, former U.S. Secretary of Labor under President Bill Clinton (1993-1997), says Prop 22 could end up encouraging other companies “to reclassify their work force as independent contractors, and once they do, over a century of labor protections will vanish overnight.”
Indeed, the promise of higher wages and more benefits for drivers should fool nobody, since all of these gig companies continue to be massively unprofitable, even as they spent over $200 million to pass Proposition 22. How could they possibly afford to allocate more remuneration for drivers, including promised subsidies for healthcare, when they have already been losing billions of euros every year?
Labor advocates grasp at straws – including fake sectoral bargaining?
Labor unions in the US have been caught flat footed by all this, with little effective support for gig workers, or a plan for how to turn these into better jobs. The unions also don’t have the financial resources to fight these deep-pocketed companies. Indeed, some US labor unions, such as the Transport Workers Union and the International Association of Machinists, seem to be looking for ways to strike a deal with the companies if it might lead to modest improvement. That deal would have drivers give up the right to be classified as employees and accept a third-category of worker status – neither employee nor contractor –in return for granting the drivers a scaled back version of collective bargaining rights, with no strikes, boycotts or picketing allowed.
This deal is being called “sectoral bargaining,” and it has divided the labor movement. Germany’s version of that is being cited as a model. But many labor advocates and organizations are calling it pseudo sectoral bargaining, and saying it will lock in the exploitative conditions of being a gig worker. U.S. law has mostly restricted unions to organizing within individual companies, known as “enterprise bargaining.” Such a disaggregated system makes it impossible for all workers in an industry to band together across companies to build the collective power necessary to win concessions. German unions have used sectoral bargaining effectively, allowing unions to negotiate with employer organizations on sectoral agreements rather than having a different contract with each company.
But critics say the Silicon Valley version will not allow drivers to organize a democratic and autonomous union. Instead the companies would be in a dominant position to choose the union for the workers. The closest existing model to what Uber is trying to pull off is the Independent Drivers Guild in New York City, oddly-named because it has been funded by Uber since its launch a few years ago. It is also affiliated with the Machinists Union. The drivers themselves had no say in the choice of this organization, and many call it a “company union.”
The IDG has had some minor successes, helping to secure a minimum wage and other driver benefits. It claims to represent tens of thousands of ride-hailing drivers in New York, New Jersey and Connecticut. It has provided a way for drivers to address smaller concerns with the ride hailing companies, but in return it and the Machinist Union had to agree not to contest drivers’ lack of employee status.
A large part of the challenge is that the gig economy is less a single sector and more a part of the precarious economy that is outside of labor relations. Without real worker power among these “distributed workers” (see my previous Mitbestimmungsportal column), many labor experts believe that the Uber-proposed sectoral bargaining would legalize the existing lopsided power relationship between the Uber-Lyft duopoly and their drivers. This could result in more company unions that are dominated by management.
Uber and Lyft recently pushed hard to try and pass legislation for its IC+ proposal through the New York state legislature. The bill defined drivers as “network workers”– solo self-employed workers and contractors – rather than employees. The drivers would be allowed certain protections and the right to join a labor organization that would bargain on a sectoral basis that includes all drivers. But the companies tried to sneak into this bill favorable clauses such as: workers are prohibited from striking while they are bargaining with the companies; and municipalities are largely prohibited from regulating work done through ride-hailing or delivery apps, which would have rolled back the popular driver minimum pay standard in New York City.
The Transport Workers Union, the Machinists and the Machinist-affiliated Independent Drivers Guild negotiated with the Silicon Valley companies and legislators. “If large groups of workers see a pathway to improve their current economic situation by entering into initiatives that would allow them to form unions,” said John Samuelsen, the president of the Transport Workers Union, “then I’m with the workers.” Samuelsen and others argued that these workers don’t care if they are classified as “employees,” instead their priorities are higher wages, more safety protections, and access to a few portable benefits. Mary Kay Henry, national president of the Service Employees International Union (SEIU), the second largest union in the US with nearly 2 million members, said sectoral bargaining could create “stable, decent jobs” in the wake of Proposition 22.
But in a reflection of the splits in the labor movement, SEIU’s New York City branch, Local 32BJ, opposed Uber‘s legislation. In addition, sixteen labor and progressive groups condemned the New York bill, including the United Auto Workers, National Employment Law Project and New York Civil Liberties Union, saying, “This bill would set a dangerous precedent for the country, Make no mistake, if these companies win in New York state, they will try to replicate these carve-outs from labor law nationally, putting millions of workers at risk.”
Under pressure from these national groups, eventually TWU and the Machinists/IDG withdrew their support, and the bill died. “The companies’ sectoral bargaining bill was drafted without workers’ input,” said Ligia Guallpa of the nonprofit Workers Justice Project, an organization that claims more than 10,000 delivery drivers as members. “They don’t get to decide their own representation.” Bhairavi Desai, executive director of the New York Taxi Workers Alliance, which has organized both app-based and traditional livery drivers, opposed the New York legislation, saying “They’re talking about the right to bargaining that’s a Trojan horse.”
But Uber and its allies vow to try again, hoping they can find the right mix of mutual attractions. States in Uber’s crosshairs include New York (again), Connecticut and Illinois. Rome Aloise, head of the Northern California chapter of the Teamsters union, says “Everybody would love to see some resolution. It’s just what that looks like is the problem.”
Winning a battle, or losing the war?
Certainly, US labor unions are in a tough spot, trying to prevent more Proposition 22 losses and also trying to expand their membership ranks. With private sector union membership having declined to 6.3% in the US, some unions are hoping that these kinds of compromise deals can boost their membership, as well as ward off total war with the platform companies and their big financial war chests. In New York, Uber’s proposed law would have increased union membership by an estimated 150,000 new members (none of whom would pay dues, since the union would be funded by a small fee attached to each Uber ride). But what happens to those unions’ reputation if those drivers only get nominal union membership, and few material changes to their working conditions?
For understandable reasons, the US labor movement remains very divided over the best approach. Labor economist Marshall Steinbaum of the University of Utah worries that some unions have latched onto sectoral bargaining as a quick fix during a moment when the US labor movement is weak. Indeed, shortly after Proposition 22 took effect in California, the Albertsons grocery store chain fired its delivery drivers and replaced them with app-based “independent” drivers. Professor Dubal says, “They’re going to start trying to gig-ify other sectors. And that’s where this stuff becomes more about the broader labor movement.”
And other states are fighting back. Massachusetts Attorney General Maura Healey filed a lawsuit against Uber and Lyft, seeking an AB 5-like victory that classifies workers as employees under Massachusetts Wage and Hour Laws. “Uber and Lyft have built their billion-dollar businesses while denying their drivers basic employee protections and benefits for years,” says the lawsuit. “We are seeking this determination from the court because these drivers have a right to be treated fairly.” Another uncertain factor here is the Biden administration, which has yet to stake out its position on these matters. But as a candidate, President Joe Biden expressed strong support for AB 5’s cracking down on misclassification.
The US labor movement is at yet another crossroad that could potentially affect tens of millions of American workers. And with these companies announcing that they intend to spread their IC+ model around the world, it will also affect workers in Germany and the European Union. Will labor unions figure out how to organize these app platform workers, from Amazon to Upwork to Uber? Or will they strike mostly ineffective deals with these companies, and earn hostility from bitter workers who continue to see their conditions deteriorate?
The battle over Proposition 22 continues. On Friday, August 20, 2021, a lower court judge in California struck down Prop 22, calling it “unconstitutional” and “unenforceable,” though the law will stay in place during the appeals process. The judge’s decision was focused on a legal technicality rather than the pros and cons of the law. Because the California state constitution gives the legislature “unlimited” power to regulate injured workers’ compensation, and because Prop 22 in essence restricted the Legislature’s ability to decide who is covered by workers’ comp, the judge ruled that Uber must pass a constitutional amendment instead of a mere statute. The lawsuit against Prop 22 was brought by the Service Employees International Union, but Uber is appealing this decision. The case will not be decided many months from now, ultimately by the California Supreme Court or even the US Supreme Court. So this fight is far from over.