California backs Proposition 22: Great news for Uber, Lyft as their drivers can work as indie contractors

And bad news for Facebook, Google after Golden State favors online privacy measures


Californians have overturned lawmakers in two critical ballot measures covering the gig economy and online privacy, with broader implications for the whole country.

Proposition 22 passed with 58 per cent of the vote (with 83 per cent of votes counted) and will exempt app-based drivers from legislation that required companies like Uber and Lyft to treat their drivers as employees rather than independent contractors.

That legislation – AB5 – came into effect in January and required gig economy companies to provide drivers with a range of benefits including health insurance and paid time off in the US state. It was a landmark piece of legislation that was vigorously fought by those companies and was upheld repeatedly in the courts.

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Those same companies – notably Uber and Lyft – put Proposition 22 on the ballot and spent an extraordinary $200m in a campaign to get voters to back it, claiming, somewhat misleadingly, that they would have to shut down their businesses because of the additional costs of AB5.

There was a $20m counter-campaign funded by labor unions – who planned to get those same drivers to unionize – but the slick and well financed Uber/Lyft effort had the desired effect and a majority of voters passed the measure. Uber’s share price went up 12 per cent on Wednesday; Lyft’s by 8 per cent. Money well spent.

The decision is likely to have a big impact across the United States, with many states looking at California – where most of the gig economy companies are based – to decide how to approach the issue in their own jurisdictions. Uber, Lyft, Doordash and other companies are certain to rollout similar campaigns wherever state legislatures consider forcing them to recognize drivers as employees.

Privacy

Another ballot measure – Proposition 24 – covering online privacy rights also passed by 56 per cent (with 83 per cent of votes counted).

That vote is also a rejection of politicians in Sacramento, who were pressured into passing the California Consumer Privacy Act (CCPA) in 2018 after a similar ballot measure looked certain to pass.

The CCPA was vigorously fought by tech giants like Facebook and Google who didn’t want to give consumers the right to demand that they delete personal data held on them. Politicians watered down the law after it was passed. And California’s attorney general did not appear too willing to enforce the measures that were still in place – some suspect because of the enormous political influence of companies like Google and Facebook – causing the person who had put together the original ballot measure to propose a new one with stronger protections.

The most significant aspect of the new proposition is the creation of a new body – the California Privacy Protection Agency – which will take enforcement away from the attorney general. It also added new protections, including the ability of consumers to tell companies not to share their personal data, to change incorrect data, and requiring permission from parents before data on under 13s can be gathered.

Notably, however, the proposition did not get the support of many privacy advocates, or even some of the original group of three people that put forward the first ballot measure.

A main concern was that the new proposition effectively locks an “opt-out” model of privacy into the law where consumers are required to actively tell a company that they don’t want their data stored, shared or sold; as opposed to an opt-in model where companies are required to ask permission before storing personal data.

The impact of this decision is also certain to have a significant impact across the US. The passing of the CCPA had already sparked a number of other states to put forward similar privacy legislation and has driven a big push by tech giants to pass a new federal privacy law that would override it.

That push has repeatedly failed thanks to partisan wrangling but the approval of Proposition 24 is likely to revive efforts. At the same time, it is impractical for companies like Google and Facebook to have one set of rules and policies just for Californian residents so they will likely need to apply the same rules for everyone in the US, making California’s law the de facto privacy law.

And so we can expect a concerted effort by tech giants in 2021 to find ways around the new privacy legislation. Such is politics. ®

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