Two California Ballot Measures Could Have Outsized Impact On Tech Companies

There are 13 measures on the Nov. 3 ballot, but two in particular could have an outsized impact on the tech industry in L.A. and beyond. They are propositions 22 and 24.

Proposition 22, into which Uber and Lyft have poured tens of millions of dollars, has received most of the attention. It will decide whether delivery and ride-hailing workers will be employees or independent contracts. Proposition 24 will determine online data collection and could have broad implications for consumers and tech companies alike.

Here's what you need to know.

Proposition 22

What it is: The initiative aims to classify an estimated 300,000 to 400,000 of California's app-based ride-hailing and delivery drivers as independent contractors. The Uber and Lyft-backed measure has been at heart of a fight over gig workers' rights.

Why it matters: This measure would alter AB5, a new state law that upended gig employment by forcing companies to classify certain workers as employees instead of independent contractors. Independent contractors don't receive worker's compensation or other labor benefits. The arrangement keeps cost down for companies such as Uber and Lyft, who avoid paying payroll taxes.

If the measure fails, experts say that ride-hailing apps could see labor costs soar 20 to 30%, threatening their core business model. And California, a top market for the apps, could be a testing ground. Twenty-six states currently have mechanisms for some type of ballot initiative or referendum, even though they aren't as expansive as California's, said Rey Fuentes from the advocacy organization Partnership for Working Families.

Much like Prop 13, an initiative that has been bedeviled since it was passed in 1978, this measure would become extremely hard to overturn, needing a seven-eighths vote in the Legislature.

Who supports it: Uber, Lyft, DoorDash, Instacart and Postmates, to start. They've poured over $180 million into campaign funding, making this the most expensive ballot measure in California history. Proponents point to the measure as a way to protect driver flexibility and provide workers with benefits. The Prop 22 campaign says failure to pass it will bump up ride-hailing prices by as much as 100% in some places, spike wait times for rides and deliveries and lead to job losses.

Who opposes it: Labor advocate groups have pooled just over $13 million for their No on Prop 22 campaign. They say that under the change, drivers will become ineligible for safety protections offered by the state like paid sick leave and unemployment benefits. And once passed, the proposition will likely never be undone — this one would take a seven-eight vote of legislature to amend.

As we reported last month, new ride-hailing companies are pouncing at the opportunity to attract drivers in one of Uber and Lyft's biggest markets. Two founded in Texas are preparing to launch in L.A. in the coming weeks. Those alternative business models sprung up in the wake of a similar battle three years ago in Austin, when Uber and Lyft left town after the city passed a bill requiring criminal background checks and other protocols. Texas later passed a measure that override local regulations and the companies returned.

Last month, Seattle was the second city to enact a standard minimum wage for gig workers following New York in 2018.

The most recent poll from Berkeley shows support for Prop 22 at 39%, with 36%of likely California voters opposed.

Proposition 24

What it is: This measure would expand on privacy regulations that let consumers opt-out of data sharing on apps and websites. This is already something users can do — if they're willing to sometimes hunt around for that "Do not sell" button.

Prop 24 would require that more companies offer an opt-out feature and allow consumers to correct inaccurate private information. If it passes, the state would also spend $10 million annually on a privacy protection agency to oversee the effort.

Why it matters: This isn't the first ballot measure that's been filed to strengthen statewide online privacy laws. A San Francisco-based real estate developer, Alastair Mactaggart, tried to get a similar measure on the ballot in 2018, but it failed. After negotiating his proposal with the Legislature, California passed the California Consumer Privacy Act of 2018, which went into effect this year. Critics point to loopholes and missteps in the regulations that make CCPA ineffective.

The initiative on November's ballot takes those privacy laws — which include giving users access to their personal info and the option to delete it — a step further. Under the measure, more companies would have to allow users opt-out of sharing personal info. Again, the onus would be on individual consumers to opt out on their own. Prop 24 would also raise fines for collecting data from underage users and allow users to correct personal information.

Who supports it: Andrew Yang, a former presidential candidate, is the chair of its advisory board. "Currently, Big Tech siphons the data of millions of Americans every minute and sells and resells that data for billions of dollars," he wrote in an article for the San Francisco Chronicle last week.

Mactaggart, who introduced the ballot measure, has donated just over $5.5 million into the campaign.

Who opposes: Consumer protection agencies say the initiative won't do enough to actually protect people's private information online. The ACLU of California calls it a "fake privacy law" in its 2020 ballot guide, adding that businesses could start charging consumers who don't want to share their information. These "pay for privacy" schemes are already allowed under the current CCPA and opponents are worried it could become the norm.

"It's out of step with what people want," said Jake Snow, a technology and civil liberties attorney from the ACLU. He's worried the measure will disproportionately affect vulnerable communities who don't have the time or money to safeguard their data.

The Consumer Federation of California, a nonprofit advocacy organization, is the largest donor to the effort opposing Prop 24.

Richard Holober, the federation's president added that users that don't opt in for data sharing could be forced to pay a premium or could be penalized in some way, for instance with slower service and pop-up ads. Both groups advocate instead for an "opt-in" button for data sharing.