California’s labor movement recently seemed on the verge of a new era for worker rights. A state court ruled that workers in the gig economy should have many of the protections of employment, like a minimum wage and overtime pay. And the State Assembly passed a bill codifying that ruling and adding more protections.
But any celebration was premature. Behind the scenes, a few large unions had been meeting with the giants of the ride-hailing industry, Uber and Lyft, to discuss a way to exempt drivers from full employment protections, according to union and industry officials. The talks have created deep rancor within the labor ranks and set unions against one another.
Exempting Uber and Lyft from classifying drivers as employees would provide huge savings in labor costs and allow the companies to avert what could be an existential threat to their business.
In return, Uber and Lyft — which currently classify drivers as contractors — have publicly proposed to recognize a labor organization that would represent drivers’ interests on certain issues. The companies have also discussed providing drivers with benefits like retirement saving and paid time off and setting certain pay standards.
At a meeting of union officials within the last two weeks, the executive director of the California council of the Service Employees International Union, one of the unions in discussions with Uber and Lyft, put forth a proposal along these lines, according to two people who attended the meeting.
But on a conference call on Friday with the executive director, Alma Hernández, and several S.E.I.U. officials in California, one of the union’s national leaders, Heather Conroy, appeared to reject the idea, according to a person on the call. Ms. Conroy said the union supported full employee status, including the California bill that would enshrine it.
The change in the S.E.I.U.’s apparent openness to exploring less than full employment status comes amid considerable opposition to the idea both inside and outside the union. One local in California, the United Healthcare Workers West, has threatened to oppose such a proposal publicly, according to the union’s president, Dave Regan.
In mid-June, Héctor Figueroa, the head of a large S.E.I.U. local in New York, wrote of a similar proposal, “Collective bargaining without a minimum wage, which is what this would be, means that we are forced to bargain for what should already be rightfully ours.” Mr. Figueroa also criticized the companies’ attempt at negotiating a “back-room deal” in California.
David Huerta, the president of the United Service Workers West, an S.E.I.U. local in California, said in a statement, “Neither Alma nor S.E.I.U. have ever pushed forward anything that would take away employee status for gig workers or advocate for independent contractor status for any gig worker.” Mr. Huerta said he has attended internal and external meetings about gig workers with Ms. Hernández.
Uber and Lyft have made clear in their conversations with labor leaders that full employment status is a nonstarter, according to an industry official.
An Uber spokesman cited a line from a recent op-ed article by the chief executives of Uber and Lyft that said, “Our companies are ready to provide additional protections that workers need and deserve today.” A Lyft spokesman declined to comment.
There is precedent for Uber negotiating a deal with a union that stops short of granting drivers employee status. In 2016, Uber announced an agreement with a regional branch of the International Association of Machinists and Aerospace Workers to create an organization for drivers in the New York City area.
That deal has drawn criticism within organized labor, but machinists’ leaders argued that the agreement was the best they could achieve. Without the organization, for example, the union would have no way to contact all of Uber’s New York City drivers, making it difficult to organize them. Dues are voluntary, but drivers who pay them have more say in the organization’s decisions.
But in California, labor groups and ride-hailing drivers, who number more than 100,000, find themselves with considerably more leverage thanks to the state Supreme Court ruling.
“We won a court case that gave workers rights,” said Cesar Diaz, the political and legislative director for the State Building and Construction Trades Council. “To cut some kind of deal that takes away rights, that is not what labor unions are about.” Mr. Diaz said that any move to include exemptions in the legislation could open the door to denying full employment protections to workers in other sectors.
In its 2018 decision, the state Supreme Court ruled that workers should be considered employees if they perform a task that’s part of the “usual course” of a company’s business. Most legal experts concluded that driving was central to Uber’s business and that drivers must be considered employees under the ruling, said Veena Dubal, a professor at the University of California Hastings College of the Law.
This May, the state’s Assembly passed a bill that would extend the ruling in certain respects and limit it in others. The court ruling applied mainly to minimum wage and overtime laws, while the legislation, Assembly Bill 5, would apply to all aspects of employment, including unemployment insurance, workers’ compensation and paid sick days. At the same time, the bill exempted certain high-paying professions from the Supreme Court ruling, such as doctors and real estate agents.
Over all, millions of workers in the state could be affected by the legislation, including construction workers, janitors, house cleaners, cable installers, truckers and delivery drivers.
In July, the State Senate will hold hearings on the measure. Legislators working with Uber and Lyft could attach an exemption for drivers or write separate legislation to do so.
Despite the S.E.I.U.’s insistence that it supports the bill and full employment status for drivers, the union appears willing to continue negotiating with Uber and Lyft. It has created what it calls a “national bargaining committee to provide national leadership on the negotiations” with the companies, according to an email dated June 21 from Ms. Conroy, an executive vice president of the union, that was reviewed by The New York Times.
At stake are billions of dollars in potential costs for the two companies. Industry officials have estimated that relying on employees is about 20 to 30 percent more expensive for gig-economy companies than relying on contractors. In its filing for an initial public offering earlier this year, Uber told investors that having to classify drivers as employees would “require us to fundamentally change our business model, and consequently have an adverse effect on our business and financial condition.” Lyft’s filing included a similar warning.
This spring, the companies won a victory when the general counsel of the National Labor Relations Board, an appointee of President Trump, concluded that drivers are contractors, meaning they effectively lack the protections of federal labor law. The Trump Labor Department issued a similar verdict, through a so-called “opinion letter,” a few weeks earlier. But California law would supersede those decisions in most respects.
To fight their legislative battle in California, Uber and Lyft have resorted to a longstanding tactic: trying to mobilize drivers. Uber sent one message to drivers through its app saying that “unless the California Legislature takes action to modernize the law, you could lose your ability to work with multiple apps and control when and where you choose to drive with Uber,” then urged drivers to sign a petition. Uber said tens of thousands of drivers signed.
But it’s not clear how effective the tactic will be in an era of rising driver frustration over pay and arbitrary treatment, as well as regular driver protests.
Some labor groups are calling for hundreds of workers to descend on Sacramento on July 10 to demonstrate support for their employment rights as the State Senate considers the legislation.
Nicole Moore, a member of the organizing committee for Rideshare Drivers United, a driver group, said many drivers were upset by the efforts of Uber and Lyft to enlist them in fighting against employment status.
“I have never seen so many angry messages about ‘How dare they say I should advocate against my own rights?’” Ms. Moore said.
Ms. Moore also expressed frustration that drivers had not had a direct role in the negotiations between the unions and Uber and Lyft. “Rideshare Drivers United has 5,000 members now,” she said. “Were we contacted by them? No.”