DOL guidance: arrow in Uber’s quiver or thorn in its side?

New guidance from the U.S. Department of Labor might seem like an outright gift to Uber and Lyft. As drafted, the guidance defines employment in a way that appears to solidly place their drivers into the independent contractor category, in direct contravention of Dynamex and Assembly Bill 5. It's what the companies have been advocating for since well before AB 5 was enacted.

What could be more compelling than a federal agency stating that gig workers -- who barely make minimum wage and have no benefits to fall back on when they get sick or lose their jobs -- are completely on their own? The reality, however, is that it's merely fool's gold for California companies: shiny and meaningless.

The DOL opinion, which is awaiting public comment before being finalized, is ultimately binding on no one. In California, where Uber, Lyft, Instacard and DoorDash have now spent a combined $184 million to convince voters that drivers should be hung out to dry, it provides no help at all. Unless there exist rogue drivers who cross state lines to shepherd passengers to their destinations, the federal opinion will not apply.to these gig companies.

The DOL guidance could be a boon to trucking companies whose drivers engage in interstate commerce by traveling over state lines or transporting goods whose origin was outside the state. But for the gig workers who drive people from place to place, there is no way to rely on an interstate exemption to escape California's employment laws. If nothing else, the federal opinion letter serves as a perfect foil to the California PUC ruling holding Uber and Lyft transportation companies subject to utilities regulation.

Think about it: The gig companies spent more than $180 million to promote Proposition 22, the Protect App-Based Drivers and Services Act, which will be before California voters on Nov. 3. Had they done the right thing by classifying drivers as employees when Dynamex was decided or when AB 5 took effect, they would now have $180 million to pay payroll taxes on their workers. The math is pretty clear. That money is now gone, and the companies have little hope of getting what they're looking for.

A recent poll by the UC Berkeley Institute of Governmental Studies shows that 39% of likely voters would vote yes on Prop. 22, 36% would vote no, and 25% remain undecided. Prop. 22 needs just over 50% of votes to pass. The companies could now use the DOL opinion to buttress their argument before voters, but even if voters somehow find their way to approve the measure -- despite the horrible fallout and optics of the coronavirus pandemic -- it will certainly be challenged in court.

The best news for Uber and Lyft, should Prop. 22 prevail, is that their pain will be significantly delayed. The case will wend its way through the courts, buying them at least two more years to do nothing. Should Prop. 22 fail, the companies won't have a leg to stand on. At that point, they'll have to put their money where their mouths are: exit California or create a franchise model to continue doing business in the state.

What does it all mean for California's gig workforce? Other than for truckers and categories of workers already subject to carve-out, the DOL guidance is just more smoke in the skies over the state. It's an annoyance that will eventually clear up and go away. 