Gov. Gavin Newsom and the Employment Development Department are giving Uber, Lyft and other gig companies what they hoped for: unemployment coverage for drivers paid by federal taxpayers through the CARES act, instead of state unemployment funds.
Since the coronavirus hit, there has been mass confusion over how Lyft and Uber drivers, as well as other gig workers, might qualify for unemployment benefits â who should pay, and how they should file.
The Secretary of the California Labor and Workplace Development Agency, Julie Su, released a statement on April 14, saying that the department was creating a new website for independent contractors to apply for the federal pandemic unemployment insurance (PUA). According to Su, the website is scheduled to open in two weeks and deliver PUA benefits in 24-48 hours.
In a press release on April 15, Newsom mentioned the new website for contractors and gig workers. He said: âMany Californians are one paycheck away from losing their homes or from being able to put food on their tables, and COVID-19 has only made these challenges worse. California is focused on getting relief dollars and unemployment assistance in the hands of those who need it as quickly as possible.â
How Californiaâs hundreds of thousands of gig workers qualify will have implications for their future in the golden state.
Contractors vs Employees
Uber, Lyft and other gig companies have consistently, and controversially, classified their drivers as contractors. By doing so, companies have avoided paying into the state unemployment fund. If a company does not contribute to unemployment insurance, there is no money when an employee files a claim. This is why drivers are being told now that they do qualify for unemployment.
Assembly Bill 5 became law last January and made it much harder for gig companies to argue workers are contractors and not employees. Still, despite the new law, companies like Uber and Lyft have continued to classify workers as contractors.
Many drivers have either been without work or had earnings massively reduced. With the sharp decline in business, they have turned to unemployment offices for help.
Uber and other gig companies succeeded in getting the federal government to make its drivers eligible for Pandemic Unemployment Assistance (PUA) through the CARES ACT. But, to get this money, the drivers have to be recognized as contractors, not employees.
That puts states like California, where there is a legal battle for driverâs to be recognized as employees, in a difficult situation.
Since the beginning of the pandemic, the EDD, the department that disburses unemployment insurance, has encouraged anyone who believes they are misclassified as contractors to apply as employees. But now gig workers are being encouraged by the EDD and Governor Newsom to go to this new website and apply for federal aid as contractors.
Labor advocates have said turning to federal taxpayers is the result of failing to hold companies accountable for years over the question of employee classification.
In a statement, the California Labor Federation said, âGov. Newsom took action today to free up federal relief dollars for gig workers while asserting their rights as employees under California law, but it should never have come to this. All taxpayers are now on the hook as a result of these wealthy companiesâ refusal to follow the law.â
Steve Smith, a representative for California Federation of Labor, said he hopes the state can take legal action to recover the money Uber and Lyft should have been paying into unemployment funds.
âThese companies are on the hook for unemployment insurance and paying back taxes. Nothing about that has changed,â Smith said. âWeâre going to continue asking the state to aggressively pursue those back taxes.â
The Uber Lobby: Pressing for Contractor Status
Uber has been pressuring the agency and the governor to change this recommendation.
Last week, Uber sent the governorâs office an email asking Newsom to alter how the state was considering drivers. It requested that the governor ask the EDD to change the language on their website.
KQED acquired a copy of that email. It says, in bold:
âSpecifically, we ask that EDD remove the sentence âIf you are a gig worker, you should list your gig employer as your last employerâ from its website. The EDD guidance that directs applicants to âlist your gig employer as your last employerâ should be removed from the EDD website, and we ask that you work with EDD to do so immediately.â
Uber confirmed that it sent the email and plans to follow up with a formal letter. It also said, “Refusing to take advantage of the federally funded Pandemic Unemployment Assistance included in the Congressional Relief Package is not in the financial interest of drivers and delivery people, or the state of California.”
The EDD has not altered its website. But with the announcement of the new website for gig workers, the battle appears to have already been won.
Paying Back Unemployment in Other States
Last year, the state of New Jersey sent Uber a bill for $650 million in unpaid unemployment funds. Given the number of drivers in California, the amount to cover unemployment payments would likely be in the billions of dollars.
UC Hastings law professor Veena Dubal says not only may the state not recover all the money that taxpayers are fronting right now to pay insurance, but this decision could influence how gig workers are treated in the future.
Dubal recently sent a letter to EDD departments across the country, warning that categorizing drivers as contractors to get the federal PUA money was a coup for gig companies as it established a dangerous precedent.
âIâm worried it sets a cultural practice for state agencies to start thinking of these workers as contractors and rejecting unemployment insurance claims in the future,â Dubal said, âwhen really these workers are employees who should always be entitled to unemployment.â
Uber has said that it has plenty of cash to ride out the coronavirus. In March, CEO Dara Khosrowshahi said the company had $10 billion in unrestricted cash to ride out the pandemic.
Living Paycheck to Paycheck
While Uber may be able to ride out the pandemic, many drivers, like Kris John, wonât be able to make it very long without a source of income.
John has been without work for over a month. He filed for unemployment in early March and was told he would get zero dollars. He says he feels like heâs called EDD offices over a thousand times, trying to get someone on the phone to help him sort this all out.
He canât understand why state agencies werenât more prepared, especially because AB 5 has been law for months.
âIâm really baffled that no one in the state of California for one second thought drivers might lose their jobs and have to file for unemployment,â he said.
Kris said California has already taken far too long getting money to gig workers like him. While he needs the money, he doesnât think itâs fair for it to come from taxpayers instead of companies that have billions of dollars in cash reserves.
Copyright 2020 KQED