California Gives Uber, Lyft Drivers Collective Bargaining Rights

Hundreds of thousands of ride-hailing app drivers gained a path to negotiate a first union contract with Uber and Lyft, even as they remain classified as independent contractors, under legislation signed Friday by Gov. Gavin Newsom. 

The law was hailed as a milestone for app-based drivers in their yearslong battle to expand workplace rights, though critics of the measure said drivers will face serious hurdles to convince the tech giants to raise their pay and benefits.

“We are now empowered to affect the conditions and the wages of the drivers,” said Joseph Augusto, who has driven for Uber and Lyft in the Bay Area for more than 10 years. “We are looking forward to building a union and trying to negotiate with Uber and Lyft. This is a step forward. It’s going to take a lot more work, but this is the beginning.”

Ride-hail drivers in California have formed unions in the past, but the app-based transportation giants weren’t required to bargain with them. AB 1340 by Assemblymembers Buffy Wicks, D-Oakland, and Marc Berman, D-Menlo Park, will change that starting Jan. 1 for drivers’ unions certified by a state board.

Uber, Lyft and other gig companies successfully fought to classify drivers as independent contractors in a 2020 California ballot measure. Under federal law, most private sector employees have the right to collectively bargain and receive benefits such as minimum wage and overtime; independent contractors typically do not.

The new legislation requires app-based transportation companies and certified unions to negotiate in good faith over issues such as driver deactivations, paid leave and earnings. It also protects gig drivers from retaliation and offers the opportunity to reach an industry-wide contract.

The Public Employment Relations Board is set to enforce the provisions, including by overseeing union elections and bargaining, mediating disputes and determining whether any unfair labor practices occurred.

Uber and Lyft initially opposed the measure, arguing that it would increase the price of rides and exclude most drivers who don’t work a significant number of hours per week. But the companies changed their stance in August, in exchange for significant reductions in insurance requirements through another bill, SB 371.

Opponents to that bill argued that the concessions, which are expected to save the companies money by lowering the underinsured motorist coverage from $1 million to $60,000 per person, will shift the financial burden from serious accidents to vulnerable Californians and hospitals. The companies said the move will help them reduce the price of ride-hail services.

“AB 1340 and SB 371 together represent a compromise that lowers costs for riders while creating stronger voices for drivers — demonstrating how industry, labor, and lawmakers can work together to deliver real solutions,” Ramona Prieto, Uber’s head of public policy for California, said in a statement.

According to Uber and Lyft, drivers enjoy the flexibility to set their own schedules and an employee model threatens the companies’ survival. The 2020 ballot measure backed by the companies, Proposition 22, promised drivers would receive at least 120% of the local minimum wage, a health care stipend of up to $426 for those working a certain number of hours and accident insurance.

But many ride-hail drivers say they have seen their real wages slip since, while the companies became profitable. Researchers at the UC Berkeley Labor Center found last year that California passenger drivers made less than the state’s minimum wage, after car expenses and excluding tips.

AB 1340 restricts the organizations that may be certified to represent drivers to those that have experience negotiating a labor contract or that are affiliated with such a union. Supporters of the measure said the requirements will ensure legitimate organizations have the resources to represent what could become a very large statewide bargaining bloc.

Rideshare Drivers United, an organization with more than 20,000 California gig driver members, said the conditions could unduly benefit the Service Employees International Union, a major labor group that sponsored AB 1340 and backed a similar initiative in Massachusetts that voters approved last fall. Jason Munderloh, who began driving for Uber and Lyft in San Francisco 11 years ago, said he is also concerned that the new law does not guarantee the right to strike, a key to union leverage.

“It’s a missed opportunity,” said Munderloh, who volunteers with Rideshare Drivers United. “We’re going to be in what might be a very long fight. We need to start on the right foot. And we need a very strong [law]. And I just don’t see that that’s the way AB 1340 is.”

Munderloh pointed to the difficulties unionized employees covered by the National Labor Relations Act have had in securing a first contract with Starbucks, Amazon and other large corporations. Employer opposition and the lack of financial penalties for unfair labor practices under that federal law make it difficult for some employees to ever win a first union contract, according to researchers.

California’s new legislation allows ride-hail drivers to engage in protected union activities, such as a work stoppage. But the state can’t guarantee the right to strike because of federal antitrust laws, according to Scott Kronland, an attorney with Altshuler Berzon in San Francisco who advised the SEIU on AB 1340.

It’s yet to be seen whether federal courts could see striking ride-hail drivers as businesses banding together to illegally reduce competition, since they are not employees.

“It’s a very complicated bill, but there are significant legal constraints,” said Kronland, who argued a challenge to Proposition 22 on behalf of several drivers and unions. “And basically, this is the best you are going to do with Prop 22 and federal antitrust laws until you can change them.”

AB 1340 became possible after the California Court of Appeals in that case struck down language that prevented state lawmakers from authorizing collective bargaining rights.

David Weil, a professor of social policy and economics at Brandeis University, said he was skeptical that a deal embraced by the tech giants would significantly benefit drivers in the long run, even if workers can get to the bargaining table. Uber and Lyft control their drivers’ ever-changing rates, what rides they have access to and how much riders will pay by crunching data through an algorithm that works to maximize the companies’ profits, he added.

“Uber and Lyft, because of their vast control of information and algorithms, are always in a position where they have the advantage. … To borrow a gambling term, it’s always going to be the house that always wins relative to the drivers,” said Weil, who led the U.S. Department of Labor’s Wage and Hour Division during the Obama administration. “They’re not going to surrender their ability to set prices and their ability to hold all the cards.”

This comes as Uber and Lyft continue to negotiate a settlement with California, as well as the cities of San Francisco, Los Angeles and San Diego, which sued the companies over the alleged withholding of wages for thousands of drivers during a period of time before Proposition 22 passed.

Drivers like Munderloh are demanding that the state and cities get an agreement that recoups billions of dollars in back wages and benefits, as well as raises driver pay going forward.

“The best way for drivers to improve what we’re being paid is actually the wage theft lawsuit that’s going on,” he said. “And the union struggle that we’re having here with AB 1340 is a longer-term issue.”