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March 20, 2024

App-based driving companies face questioning from elected officials over ballot initiative

A group of people at a table Image | Courtesy of Sam Doran, State House News Service A panel of industry executives face questions from the Initiative Petitions Committee on March 19, 2024 about potential ballot questions dealing with work classification and benefits for app-based drivers. From left: Lucas Munoz, Uber's director of driver policy; Kate Rumbaugh, head of government affairs for DoorDash; Katie Franger, part of Uber's policy team for the northeast; Brendan Joyce, Lyft's public policy manager in Massachusetts; and Tom McNeil, senior manager of government affairs for Instacart.

One lawmaker told gig economy executives to "buckle up" for his line of questioning. Another described the ballot question proposing to reshape the relationship between popular apps and their drivers as "holding a gun to our heads." And the top senator involved in the process said bluntly to the company reps, "I don't trust you."

Uber, Lyft, DoorDash and Instacart officials, who for years have been pushing ballot questions that would change Massachusetts labor law in ways that support their business models, got a chance Tuesday to make their case directly to lawmakers, as did unions who are instead working on a separate question that would let ride-for-hire drivers organize.

A legislative panel responded with more probing questions and pointed remarks for the industry-backed effort than for the labor-backed effort, reflecting skepticism among Democrats over what's likely to become an expensive campaign with national implications.

Company leaders on Tuesday linked their proposal -- which would define drivers as independent contractors, not employees, in state law while guaranteeing them some new benefits -- to the attorney general's lawsuit alleging that Uber and Lyft violate existing state law by treating drivers as contractors.

Brendan Joyce, Lyft's public policy manager in Massachusetts, said the "dynamic pricing model" that charges customers higher prices and pays drivers more at times of significant demand "would be totally upended" under a more traditional employee system.

The companies might be required to treat their drivers as employees if a Superior Court judge sides with state prosecutors.

"We have no choice but to pursue ballot initiatives," Joyce said. "There is a pending lawsuit from the attorney general's office. There could be a ruling in that matter ... some time in the summer or fall. It could be both after the Legislature is out of session but before any ballot question would go to voters. As I said, our preference is to work with you all, work with the Legislature, find a compromise, but unfortunately, we have no choice but to pursue these ballot initiatives."

Supporters of the measure contend that independent contractor status gives drivers far more flexibility to set their own schedules on a minute-by-minute basis. They pointed on multiple occasions to polling data that found most drivers view flexibility as key to the job and would prefer not to become employees -- including a survey that Joyce said came from the same pollster used by Gov. Maura Healey, who sued Uber and Lyft in 2020.

Lawmakers repeatedly asked supporters of the independent contractor-plus-benefits question why the companies needed to change state law instead of simply adding the benefits on top of existing flexibility.

"Your testimony kind of begs the question of why the rideshare companies, the industry, are coming forward with these changes if everything is hunky-dory with all the drivers," said Rep. Michael Day of Stoneham.

Kate Rumbaugh, head of government affairs for DoorDash, said the framework of existing labor law makes it "economically impossible for an employer to operate that way." And Lucas Munoz, Uber's director of driver policy, added that voluntarily providing those benefits might be viewed as treating drivers like employees, which "would be used against us in litigation."

"If we do it by statute, we say these are the statutory obligations for everybody in this industry, this is a floor that everybody in this industry has to meet," Munoz said.

He added that the ride-for-hire and delivery companies are "very competitive with each other," describing a "first mover problem" that could put whichever one willingly expands benefits at a disadvantage.

Sen. Cindy Friedman, an Arlington Democrat who co-chairs the committee reviewing ballot questions, criticized the companies for suggesting that "if you're not independent, you can never have any flexibility."

"You know and I know that that is specious at best," Friedman said. "I don't trust you, because you're big corporations, you're in it to make money, which is fine, not a problem. But I would argue that what has happened over the last several months is because there's so much scrutiny over these companies."

At one point, Sen. Paul Feeney of Foxborough asked about Uber and Lyft's plans to cease operations in Minneapolis after the city council there approved a measure requiring drivers to be paid the local minimum wage.

Katie Franger, who works on Uber's policy team for the northeast, said the Minnesota Legislature is also weighing industry reforms and described the city council's move as a push to "hijack that state legislative process with their own numbers."

"Their proposal would just obliterate the -- make the costs unsustainable for riders," Franger said. "The business model doesn't work when riders can't afford to request trips."

Feeney, a former union leader, pressed the companies on whether they would leave Massachusetts if voters and lawmakers do not support their proposed reforms. Neither Uber nor Lyft's representatives would give a definitive response.

"Realistically, when we look around the jurisdictions, both at the state level here in the United States and also around the world where our business operates, there isn't any jurisdiction where drivers operate as employees," Munoz said. "I think that's a relevant data point, but I can't answer your question. I can't answer your question directly."

"We are competitors, and it's tough sometimes to answer that type of question in a public setting like this," Joyce added.

After spending about $200 million on a successful 2020 ballot question campaign in California, the four gig economy giants embarked on a similar effort in Massachusetts. They donated more than $40 million toward the campaign committee working on a ballot question in 2022, but the effort came to a screeching halt when the Supreme Judicial Court ruled that it was ineligible to advance because it combined too many disparate topics.

This time around, the companies kept five different versions of the question in play, hoping that at least one will survive the latest relatedness challenge. The Supreme Judicial Court will hear oral arguments in the case in May.

"I don't think we're stupid enough to assume that the reason you spent hundreds of millions of dollars to win at the ballot in California, and the reason you're essentially holding a gun to our heads in Massachusetts saying that if you don't get your way in this state, you'll similarly go to the ballot, is because of your professed care about the status of your drivers," Sen. Jason Lewis of Winchester, who filed standalone legislation seeking to give drivers more benefits, told company leaders. "The reason you're doing this is because of your bottom line."

Campaign leaders said Tuesday they intend to put only one measure on the Nov. 5 ballot.

All five drafts would specify in state law that drivers are not employees and that the platforms are not employers. Two questions would be effectively limited to that clause, while the other three would lay out contract terms and some new benefits for drivers, according to First Assistant Attorney General Pat Moore.

Tuesday's hearing, which stretched for more than six hours, also spotlighted a separate ballot question labor groups are pushing that would clear the way for Uber and Lyft drivers to unionize.

Union leaders behind the measure said although they support the attorney general's lawsuit, they believe the industry has enough novel issues -- like how drivers appeal account deactivations -- that will not be addressed just by applying existing labor law.

"It doesn't fix the problems that these drivers are saying again and again: the issue of what share of the [fare] they get and also the issue of deactivations, the unfair deactivations," said Roxana Rivera, assistant to the president of 32BJ SEIU. "Only a union will fix those issues that plague this industry."

The multiple questions in play, and the added pressure stemming from the attorney general's lawsuit, could encourage lawmakers to broker a deal and avert complicated, intertwined measures from going before voters at the same time. But the path to a deal appears tricky with the kind of heated rhetoric on display at Tuesday's hearing.  

In addition to certifying the ballot questions as eligible to advance, the attorney general's office plays a key role in the multifaceted labor fight that's unfolding through the 2020 lawsuit that served as a catalyst.

The slow-moving case, which Healey filed against Uber and Lyft when she was attorney general, is set to go to trial in mid-May, less than six months before voters could be asked to decide the ballot questions.

Earlier in Tuesday's hearing, Day asked Moore if the lawsuit would be "mooted" should voters approve the industry-backed question defining drivers as independent contractors. Moore replied that he believes adoption of the industry-backed measure would only have a "prospective effect," not change assessment of the existing law to this point.

"There are responsibilities when a company is an employer and when the drivers are employees. There are minimum compensation benefits, there are mileage reimbursement benefits, there are penalties attendant to not following those laws," Moore said. "Should there be a declaration that the drivers are employees, those benefits should have accrued to the drivers going back as far as the law will allow us with attendant penalties. The numbers associated with those are quite large, and it will be the commonwealth's intent, with the AG acting on its behalf, to recover those."

"So yes, prospectively, the law would change if the voters desire for it to change," he added. "Far be it from us to opine on that. But the backward-looking relief will still be there, and we will intend to seek it."

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