Don't Force Gig Workers to Go Pro

By Corey Friedman

March 13, 2021 6 min read

When the COVID-19 pandemic closed restaurant dining rooms, Americans skipped drive-thru and takeout lines with the help of mobile delivery apps like Doordash, Grubhub and Uber Eats.

The four largest apps more than doubled their revenue last April through September compared with the same six-month span in 2019, according to a MarketWatch analysis of Securities and Exchange Commission filings.

Delivery services remain popular, but a bill that just passed the U.S. House could put drivers out of work and destroy the gig economy as we know it.

The Protecting the Right to Organize Act of 2021, a grab bag of labor law changes, would force businesses to reclassify millions of independent contractors as employees. On paper, drivers gain the right to unionize, and full-time workers would be eligible for heath insurance benefits. But where the rubber meets the road, most newly minted employees would find themselves unemployed.

Bill sponsor Rep. Bobby Scott, D-Va., adopted a California Supreme Court ruling's rubric for differentiating contractors from employees. Known as the ABC test, the provision reserves independent contractor status for workers who are "free from control and direction," perform services "outside the usual course of the business of the employer" and are "customarily engaged in an independently established trade, occupation, profession, or business of the same nature" as the employer.

A ride-hailing or delivery company can't claim picking up passengers or fulfilling food orders is outside its normal course of business. And in order to qualify as contractors, drivers would have to compete with themselves by performing similar work without the popular apps that connect them to customers.

Businesses can't afford to convert their vast networks of far-flung contractors to traditional employees. If they remain in operation at all, they're likely to cut most drivers loose and operate in select markets with a skeleton crew.

California legislators implemented the ABC test statewide in a 2019 law. Uber and Lyft planned to suspend service in the Golden State, but an appeals court averted that crisis by allowing them to delay compliance.

In November, California voters passed Proposition 22 to exempt app-based drivers from the employee classification requirement. In the most progressive, union-friendly state, residents reasoned that enhanced worker protections are counterproductive if they effectively wipe out an entire industry.

Congressional Democrats are determined to repeat California's failed experiment. PRO Act proponents who believe the gig economy exploits workers fundamentally misunderstand why ride-hailing took off in the first place.

The rise of mobile apps and improved smartphone GPS technology paved the way for Uber, but the company capitalized on pent-up demand for private transportation resulting from artificial scarcity.

Local governments impose strict limits on the number of taxicabs allowed to operate in their jurisdictions, issuing medallions that function as franchise licenses. Owners can resell the permits; in New York City, the going rate peaked at $1.3 million in 2014 before ride-hailing services cornered the market.

Cities customarily set cab fares and require taxi companies to offer 24-hour service, even when overnight passenger volume doesn't justify the expense. Is anyone surprised that nimble tech startups relying on drivers willing to offer rides in their personal cars as a side hustle were able to outcompete a business model hamstrung by regulation?

Cab companies can launch mobile apps, but the medallion system keeps them confined to their local fiefdoms. Uber and Lyft cultivated nationwide networks of independent drivers and reaped the rewards. Travelers appreciate the convenience of using the same ride-booking service in each destination.

The PRO Act's employee classification rules are a solution in search of a problem. Surveys indicate most drivers for ride-hailing services favor flexibility and prefer independent contractor status.

Driving for both Uber and Lyft is commonplace, which shows these gig workers to be genuine free agents. Try taking a salaried job with Coca-Cola and moonlighting for Pepsi. Where employment benefits go, noncompete clauses are sure to follow.

Ride-hailing is projected to top $117 billion in worldwide market value this year. Uber alone reported $14.1 billion in 2019 net revenue, and it has roughly a million U.S. drivers at risk of losing income.

Lawmakers may believe they're taking a stand for workers' rights, but passing the PRO Act will only usher in a ride-hailing recession.

Corey Friedman is an opinion journalist who explores solutions to political conflicts from an independent perspective. Follow him on Twitter @coreywrites. To find out more about Corey Friedman and read features by other Creators writers and cartoonists, visit the Creators webpage at www.creators.com.

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