A controversial law that allows ride-hail companies such as Uber, Lyft and DoorDash to classify their drivers as independent contractors, rather than employees, was upheld by a state appeals court last month.
California’s Proposition 22 could have transformative effects on the growing gig economy, one of which is the enshrining of ride-hail drivers not being entitled to a guaranteed minimum wage.
Instead, companies use data they collect about drivers’ behavior to set personalized wages, according to Veena Dubal, a professor at the University of California College of the Law, San Francisco, who conducted a study on how ride-hail drivers are compensated.
Dubal defines this method of compensation as “algorithmic wage discrimination,” a practice that would likely be illegal if drivers were considered employees, but since they are not, it is not protected. The study was published in the South Atlantic Quarterly.
Uber has embraced this method of pay, calling it dynamic pricing, and claims it is how they are able to control drivers when they can’t because they consider the drivers to be independent contractors. While it may violate minimum wage and overtime laws, Uber claims that these workers are independent businesspeople, and so minimum wage laws do not apply to them.
Dubal’s study found that companies use data they collect on workers’ individual behavior and location to determine how much they are going to pay them. Two drivers doing the exact same work in the exact same way and at the same time could get vastly different wages based on what the company knows about them.
“If they were considered employees, this would likely be illegal. But they’re not. And so, it’s just not protected,” she wrote.
Dubal gave an example of one driver from her research, called Diego, who was working in downtown Los Angeles during a busy time period. Diego was close to getting a bonus that would have increased his hourly wage, but he was not getting any ride requests. Diego felt that Uber knew he was close to the bonus and was keeping him in the pool of available drivers, which made him work longer for less.
When Diego calculated his hourly wage, it was far lower than someone who was not as close to achieving their bonus. While some may argue that employment law in the country is outdated and has not caught up with the new realities of what companies know about how people are doing the work, Dubal disagrees. She states that employment laws were developed to support humans and their basic needs, which haven’t changed. The rate of change in how firms have been able to avoid employment laws, primarily as a result of technological shifts, has led to a situation in which companies are able to evade enforcement.
“Any time there’s some big shot getting high pay outs, they always shame everyone else and say you don’t know how to use the app. I think there’s secret PR campaigns going on that gives targeted payouts to select workers, and they just think it’s all them,” Deigo told Dubal.
As the gig economy continues to grow, workers' rights and labor laws have become a hotly debated topic. Proposition 22’s approval in California is expected to have far-reaching implications on how the gig economy operates, and the debate around the rights and protections afforded to gig workers is unlikely to go away anytime soon.