Regulations

Told Them So: California Victory Puts Power To Truth

Martin Romjue
Posted on October 1, 2019
The GCLA, whose leadership visited the State Capitol on Feb. 13, 2019, sets an example of what a focused and organized industry trade group can accomplish. (photo: LCT)

The GCLA, whose leadership visited the State Capitol on Feb. 13, 2019, sets an example of what a focused and organized industry trade group can accomplish. (photo: LCT)

The industry pulled off its biggest win so far against Uber, Lyft, and transportation network companies (TNCs) with the signing of California’s Assembly Bill 5 on Sept. 18.

The law, effective Jan. 1, adds heft to a 2018 state Supreme Court decision, Dynamex Operations v. Superior Court, which narrowed the definitions of independent contractors. For TNCs, this means their supposedly independent drivers should be classified as employees, not gigsters plugging in for work.

Industry leaders have been fighting this battle for almost a decade since TNCs hit the streets full force under their own sets of rules and exemptions. That meant legal, licensed luxury transportation operations by state law sustained a distinct profit-and-loss disadvantage to TNCs, especially in the business travel/airport transfer segment of the market.

While the AB5 passage and Dynamex decision clarify the law, the legislative-judicial combo also incinerates the lies, positions, and deceptions we’ve heard for years from TNCs, especially Uber. It also reaffirms how Uber in particular has been one of the worst corporate citizens in U.S. history, belonging to the annals of Enron, Tyco, Bear Stearns, and WorldCom.

Let’s just review the record:

Big Capital T: Misclassification at Uber goes hand-in-hand with mislabeling. To this day, Uber still invokes its Orwellian claim it’s a technology, not a transportation, company. This was verbal jiu-jitsu. Now, the debate is over.

App-titude For Crime: The TNCs weren’t rolling for very long until the media started pumping out a never-ending stream of tabloidly, but truthful, sludge about criminal, boorish, and offensive behavior by drivers. The best employment option for anyone with a criminal, prison, and/or just overall sketchy background is to drive for Uber. There’s a reason why; it’s easy to get hired. The TNC has been derelict in applying consistent, thorough driver background checks. There’s a reason we don’t see the same rate of criminal behavior among chauffeurs, motorcoach drivers, and taxi drivers. Their employers know good business relies on safety and duty of care.

Pinched Paychecks: Enough studies show when TNC drivers factor out operational costs and overhead, their take-home pay falls below minimum wage. While they choose to work for the TNCs, the terms are stacked against them from the moment they turn on the driver app. Given how Uber manages and regulates drivers, they don’t function like independent contractors.

Crony Culture: Uber for years bred a vile bro-culture rancid from sexual harassment that make the Mad Men look enlightened. It ultimately led to the ousting of founder and CEO Travis Kalanick, the overgrown teen prince who also betrayed his attitude toward drivers when he was caught on video berating and insulting one driving him. That’s how a tyrant treats a servant — a position, by the way, for an employee.

Losses, Not Profits: Despite skirting the costly requirements of W-2 employers, underpaying drivers, and siphoning billions in capitalization, the TNCs 10 years in have yet to become profitable powerhouses. Uber has reported staggering quarterly losses. Its enabled, favored, exempted business model still can’t make money like a typical corporation. If indeed AB5 can be enforced and start setting precedents in other states, the TNCs will face a mortal challenge.

Next Steps

While the double victory of Dynamex and AB5 was long overdue, it’s only the starting point. Lest anyone try to bask in the law, Uber true to fashion already has announced they won’t obey it, and plans to fight it through legal and legislative means. Their contempt for the rule of law only adds to the company’s tawdry crony capitalist tale above.

That means more work and continued vigilance from the Greater California Livery Association. “I don’t think we can just sit back and see it roll out,” says Mark Stewart, GCLA co-legislative director. “This is just the first step. It’s the law as of Jan. 1, but the rideshare companies are openly defiant.” How arrogant, entitled, and un-American does it get?

Fortunately, AB5’s sponsor, Assemblywoman Lorena Gonzalez, D-San Diego, already has prevailed upon Attorney General Offices in major cities to be on the lookout for violations, Stewart says. The Employment Development Department (EDD) will also have a likely role in enforcement. As Uber and TNCs shall find out, freedom without fairness doesn’t last very long.

Association Advantages

If a legislative victory ever proved the worth of the industry’s state-level trade groups and associations, this would be the one. Thanks to the hard work of GCLA leaders, especially legislative directors Mark Stewart and David Kinney, President Mo Garkani, VPs Robert Gaskill and Harry Dhillon, and their hired lobbyist, Gregg Cook, the organization connected with key legislators essential to moving the bill through the procedural maze.

The AB5 victory underscores how the frontline work of advocating for operator interests happens mostly at the state level through lobbying, communicating, and rallying. It’s certainly far more effective and relatable than any public relations campaign. In fact, the best automatic PR campaign boils down to real results.

The industry should savor moments like this. Well done and three cheers. The honest Main Street businesses can still win.

Related Topics: David Kinney, driver pay, employee vs independent contractor, Greater California Livery Association, Gregg Cook, Harry Dhillon, labor laws, LCT editor, Legal Issues, legislation, limo associations, lobbying, Lyft, Mark Stewart, Martin Romjue, regulatory enforcement, Robert Gaskill, state regulations, TNCs, Uber

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