WEBVTT - Lyft, Uber and the California Prop. 22 Brief

0:00:13.600 --> 0:00:18.040
<v Speaker 1>California voters in twenty twenty adopted a ballot initiative Proposition

0:00:18.160 --> 0:00:21.720
<v Speaker 1>twenty two that was critical for gig economy companies like

0:00:21.880 --> 0:00:26.880
<v Speaker 1>lift Uber and DoorDash. But now the California Supreme Court

0:00:26.960 --> 0:00:29.800
<v Speaker 1>has heard arguments in a case that threatens to strike

0:00:29.840 --> 0:00:33.159
<v Speaker 1>it down. What is this legal fight about? Who is

0:00:33.280 --> 0:00:36.120
<v Speaker 1>likely to win? And when will it play out? This

0:00:36.400 --> 0:00:37.880
<v Speaker 1>is a Votes and Verdicts brief.

0:00:38.440 --> 0:00:42.080
<v Speaker 2>Welcome to this Votees and Verdicts podcast hosted by Bloomberg Intelligence,

0:00:42.440 --> 0:00:46.000
<v Speaker 2>part of Bloomberg's Research department, comprised of five hundred analysts

0:00:46.000 --> 0:00:50.200
<v Speaker 2>and strategists working across all major world markets. Our coverage

0:00:50.240 --> 0:00:53.279
<v Speaker 2>includes over two thousand equities and credits, as well as

0:00:53.320 --> 0:00:57.480
<v Speaker 2>outlooks on more than ninety industries and one hundred market indices, currencies,

0:00:57.520 --> 0:01:01.000
<v Speaker 2>and commodities. In this podcast series, we talk about the

0:01:01.040 --> 0:01:05.000
<v Speaker 2>intersection of business policy and law. My name is Jenniferree,

0:01:05.040 --> 0:01:08.319
<v Speaker 2>and I'm a senior litigation analyst with Bloomberg Intelligence covering

0:01:08.360 --> 0:01:09.280
<v Speaker 2>any trust.

0:01:09.319 --> 0:01:12.399
<v Speaker 1>And I'm Matt Schuttenhelm, an analyst covering US litigation and

0:01:12.440 --> 0:01:14.000
<v Speaker 1>policy in the TMT space.

0:01:14.480 --> 0:01:17.440
<v Speaker 2>Our Votes in Verdicts Brief series highlights one of our

0:01:17.480 --> 0:01:20.840
<v Speaker 2>research reports on the Bloomberg terminal, giving listeners a quick

0:01:20.880 --> 0:01:24.160
<v Speaker 2>takeaway to help grasp the key litigation or policy topic

0:01:24.240 --> 0:01:27.480
<v Speaker 2>covered in our research. Today, my colleague Matt is going

0:01:27.520 --> 0:01:31.000
<v Speaker 2>to talk about California's Proposition twenty two and why it's

0:01:31.080 --> 0:01:34.640
<v Speaker 2>under threat. Matt, can you start by describing what Proposition

0:01:34.680 --> 0:01:37.360
<v Speaker 2>twenty two is and why it's so important for companies

0:01:37.360 --> 0:01:39.440
<v Speaker 2>that rely on gig workers in California?

0:01:40.440 --> 0:01:41.800
<v Speaker 1>Absolutely? Thanks, Jen, Yes.

0:01:41.800 --> 0:01:41.840
<v Speaker 2>So.

0:01:41.920 --> 0:01:45.000
<v Speaker 1>Prop twenty two was a California ballot initiative that the

0:01:45.200 --> 0:01:49.400
<v Speaker 1>California voters adopted in the twenty twenty election, and the

0:01:49.480 --> 0:01:52.640
<v Speaker 1>key thing that it did was that it classified AT

0:01:52.800 --> 0:01:57.960
<v Speaker 1>based drivers in the state as independent contractors, not as employees.

0:01:58.560 --> 0:02:02.680
<v Speaker 1>It's at a floor or their earnings, and it provided

0:02:02.760 --> 0:02:07.160
<v Speaker 1>other benefits to them, but most importantly for the companies,

0:02:07.200 --> 0:02:12.040
<v Speaker 1>it controls their costs. So if instead APP based drivers

0:02:12.080 --> 0:02:16.400
<v Speaker 1>were employees, those costs per driver would likely be thousands

0:02:16.400 --> 0:02:20.360
<v Speaker 1>of dollars more per driver per year. We're talking about

0:02:20.400 --> 0:02:26.360
<v Speaker 1>things like wages and expenses for hours works going beyond

0:02:26.480 --> 0:02:30.359
<v Speaker 1>just their engage time, things like unemployment, insurance, and overtime.

0:02:31.200 --> 0:02:34.480
<v Speaker 1>If that were the law, that would be extremely disruptive

0:02:34.600 --> 0:02:37.600
<v Speaker 1>to the company's business model. So Proposition twenty two did

0:02:37.720 --> 0:02:40.200
<v Speaker 1>very important work in that regard.

0:02:40.400 --> 0:02:43.040
<v Speaker 2>But I understand that it's under attacking court. Can you

0:02:43.080 --> 0:02:44.840
<v Speaker 2>walk through what that legal fight is about.

0:02:45.600 --> 0:02:49.200
<v Speaker 1>Yeah, So, after the voters adopted this initiative in November

0:02:49.240 --> 0:02:53.280
<v Speaker 1>twenty twenty, a lower court in California State in the

0:02:53.360 --> 0:02:56.840
<v Speaker 1>state court system, in August twenty twenty one struck down

0:02:56.919 --> 0:03:01.160
<v Speaker 1>the law as violating the California Constitution, and that judge

0:03:01.200 --> 0:03:05.280
<v Speaker 1>effectively said that only the legislature, not the voters through

0:03:05.320 --> 0:03:11.040
<v Speaker 1>a ballot initiative, can limit workers compensation, and so that

0:03:11.080 --> 0:03:14.760
<v Speaker 1>basically struck down Proposition twenty two. But the ruling was

0:03:14.840 --> 0:03:18.440
<v Speaker 1>stayed during appeals, so it didn't immediately take effect. So

0:03:18.480 --> 0:03:21.919
<v Speaker 1>that's where we are now, waiting for the appeals process

0:03:22.000 --> 0:03:25.160
<v Speaker 1>to play out. That decision was appealed to a state

0:03:25.400 --> 0:03:29.720
<v Speaker 1>intermediate appeals court, and in March of twenty twenty three,

0:03:30.280 --> 0:03:33.480
<v Speaker 1>the appeals court reversed his decision by a two to

0:03:33.480 --> 0:03:37.680
<v Speaker 1>one vote that effectively upheld Prop. Twenty two, and that

0:03:37.720 --> 0:03:40.560
<v Speaker 1>could have been the end of the story. The California

0:03:40.600 --> 0:03:44.600
<v Speaker 1>Supreme Court denies review most of the time. The court

0:03:44.640 --> 0:03:47.480
<v Speaker 1>could have just let that appeals court ruling stand, could

0:03:47.520 --> 0:03:51.120
<v Speaker 1>have could have left Prop twenty two in place, but

0:03:51.400 --> 0:03:55.440
<v Speaker 1>it didn't. One year ago, in June of twenty twenty three,

0:03:55.560 --> 0:03:59.240
<v Speaker 1>the California Supreme Court announced that it would take this case,

0:04:00.080 --> 0:04:03.839
<v Speaker 1>and in my view, that presented enormous risk Forft and

0:04:03.960 --> 0:04:07.640
<v Speaker 1>Uber and door Dash, because usually the California Supreme Court

0:04:07.680 --> 0:04:12.119
<v Speaker 1>takes cases to reverse them. So even though in my view,

0:04:12.280 --> 0:04:15.840
<v Speaker 1>Lift and Uber and the state had the stronger legal

0:04:15.960 --> 0:04:18.599
<v Speaker 1>arguments in this case and I thought they would probably win,

0:04:19.360 --> 0:04:22.960
<v Speaker 1>the Court's decision to take this case at all is

0:04:23.040 --> 0:04:26.679
<v Speaker 1>in my view, a reason for caution and for really

0:04:26.720 --> 0:04:30.440
<v Speaker 1>extreme risk for the companies as they fight this at

0:04:30.680 --> 0:04:32.640
<v Speaker 1>the top levels in the state court system.

0:04:32.920 --> 0:04:36.640
<v Speaker 2>Right, and that outcome is coming because finally the California

0:04:36.720 --> 0:04:39.680
<v Speaker 2>Supreme Court heard arguments on the case on May twenty

0:04:39.720 --> 0:04:42.279
<v Speaker 2>first of this year. So how do you think they're

0:04:42.279 --> 0:04:43.080
<v Speaker 2>going to rule on this?

0:04:44.000 --> 0:04:46.680
<v Speaker 1>Yeah? So exactly right. The case has now been fully

0:04:46.760 --> 0:04:50.640
<v Speaker 1>briefed and the court did hear about forty five minutes

0:04:50.680 --> 0:04:55.039
<v Speaker 1>of argument in late May. And I went into that

0:04:55.160 --> 0:04:58.520
<v Speaker 1>argument thinking that, as I said, the companies in California

0:04:59.360 --> 0:05:01.960
<v Speaker 1>had the stronger legal argument here, I had given them

0:05:01.960 --> 0:05:06.000
<v Speaker 1>a sixty percent chance to win the case. But you know,

0:05:06.080 --> 0:05:08.200
<v Speaker 1>there was real risk here in the fact that the

0:05:08.200 --> 0:05:11.680
<v Speaker 1>court took the case. But as that argument played out,

0:05:13.680 --> 0:05:16.800
<v Speaker 1>I really think the companies are going to be okay

0:05:16.920 --> 0:05:20.360
<v Speaker 1>here that the companies in California faced a couple of

0:05:20.360 --> 0:05:24.760
<v Speaker 1>tough questions, but the vast majority of the difficult questions

0:05:24.800 --> 0:05:27.360
<v Speaker 1>went to the other side. They went towards the plaintiffs

0:05:27.360 --> 0:05:30.960
<v Speaker 1>who are bringing these cases. And we saw a substantial

0:05:31.040 --> 0:05:36.040
<v Speaker 1>concern from a number of justices about limiting balid initiatives

0:05:36.040 --> 0:05:39.680
<v Speaker 1>in the state, limiting the voter's ability to use this

0:05:39.760 --> 0:05:43.760
<v Speaker 1>process to change the law. That's really where I started

0:05:43.920 --> 0:05:47.839
<v Speaker 1>in my analysis of the case, and I really didn't

0:05:47.920 --> 0:05:50.680
<v Speaker 1>see a lot of justices at the court willing to

0:05:50.760 --> 0:05:55.440
<v Speaker 1>disrupt what the voters enacted in twenty twenty. So at

0:05:55.480 --> 0:05:58.160
<v Speaker 1>the end of the day, I think that's very, very

0:05:58.360 --> 0:06:02.000
<v Speaker 1>likely that the court says that voters can use the

0:06:02.040 --> 0:06:05.160
<v Speaker 1>ballot initiatives on these issues on these issues just as

0:06:05.200 --> 0:06:09.200
<v Speaker 1>the legislature can, and that the California Constitution doesn't stand

0:06:09.200 --> 0:06:09.640
<v Speaker 1>in the way.

0:06:09.880 --> 0:06:11.640
<v Speaker 2>So when do you think we'll see the decision from

0:06:11.680 --> 0:06:13.400
<v Speaker 2>the California Supreme Court.

0:06:13.760 --> 0:06:16.600
<v Speaker 1>Yeah, so's That's one of the great things about California

0:06:16.720 --> 0:06:19.280
<v Speaker 1>state law here is that it actually gives us a

0:06:19.440 --> 0:06:23.360
<v Speaker 1>pretty clear answer to that question. So the court must

0:06:23.720 --> 0:06:27.960
<v Speaker 1>release its decisions no later than ninety days after argument.

0:06:28.360 --> 0:06:32.280
<v Speaker 1>So in this case, that makes August nineteenth the absolute

0:06:32.400 --> 0:06:35.160
<v Speaker 1>deadline for this decision. And I took a look at

0:06:35.200 --> 0:06:40.720
<v Speaker 1>the court's recent pace and it almost always takes more

0:06:40.760 --> 0:06:44.840
<v Speaker 1>than sixty days, and that's July twentieth here, so and

0:06:44.880 --> 0:06:48.000
<v Speaker 1>on average, the court's taken about eighty days, and that's

0:06:48.120 --> 0:06:52.920
<v Speaker 1>August ninth year. So investors in court watchers, I think

0:06:52.960 --> 0:06:54.560
<v Speaker 1>you want to I want you think you want to

0:06:54.560 --> 0:06:58.279
<v Speaker 1>circle late July the first half of August for what

0:06:58.400 --> 0:07:01.520
<v Speaker 1>could be this very signific decision what I think will

0:07:01.560 --> 0:07:05.400
<v Speaker 1>be a significant win for lift Uber and door Dash.

0:07:05.480 --> 0:07:09.880
<v Speaker 1>And one other good piece of good news on that

0:07:09.920 --> 0:07:12.200
<v Speaker 1>the court actually gives us a heads up when its

0:07:12.280 --> 0:07:15.200
<v Speaker 1>decision is coming. We should know one day before the

0:07:15.280 --> 0:07:17.640
<v Speaker 1>decision is issued that it will come the next day.

0:07:18.040 --> 0:07:20.520
<v Speaker 1>So again, look for that in late July or the

0:07:20.600 --> 0:07:21.680
<v Speaker 1>first half of August.

0:07:21.880 --> 0:07:23.880
<v Speaker 2>Okay, So when that comes out, is it going to

0:07:23.880 --> 0:07:24.760
<v Speaker 2>be the end of the story.

0:07:26.040 --> 0:07:27.720
<v Speaker 1>I think it's going to be a very big win

0:07:28.000 --> 0:07:30.600
<v Speaker 1>for the companies, and it should go a long way

0:07:30.720 --> 0:07:35.080
<v Speaker 1>to giving them certainty in California on this really important question.

0:07:35.720 --> 0:07:37.440
<v Speaker 1>But I don't think it will be the end of

0:07:37.480 --> 0:07:42.000
<v Speaker 1>the story ultimately. Ultimately, because a number of the questions

0:07:42.080 --> 0:07:46.320
<v Speaker 1>at oral argument from the Supreme Court justices, we're focused

0:07:46.360 --> 0:07:51.000
<v Speaker 1>on ways that the legislature could still give gig economy

0:07:51.080 --> 0:07:57.520
<v Speaker 1>drivers more compensation, more benefits despite Proposition twenty two. There's

0:07:57.640 --> 0:08:00.240
<v Speaker 1>likely going to be a fight about that, and a

0:08:00.360 --> 0:08:03.880
<v Speaker 1>number of justices, though seemed open to that sort of legislation,

0:08:04.000 --> 0:08:06.680
<v Speaker 1>So it's hard to say exactly what shape that takes.

0:08:07.200 --> 0:08:10.320
<v Speaker 1>And this is certainly a big milestone if the companies

0:08:10.320 --> 0:08:12.640
<v Speaker 1>can win it, but I don't think I'm comfortable saying

0:08:12.720 --> 0:08:13.800
<v Speaker 1>that it's the end of the story.

0:08:14.440 --> 0:08:17.080
<v Speaker 2>Matt. Thank you for that excellent quick overview of your

0:08:17.160 --> 0:08:20.960
<v Speaker 2>legal research on California's Proposition twenty two. So we'll be

0:08:21.000 --> 0:08:22.920
<v Speaker 2>watching in a few months to see how the California

0:08:23.000 --> 0:08:26.640
<v Speaker 2>Supreme Court rules on this. That's today's Votes and Verdicts brief.

0:08:26.800 --> 0:08:29.200
<v Speaker 2>For Matt's full report on the topic and all of

0:08:29.240 --> 0:08:33.320
<v Speaker 2>our research, please visit bilaws on the Bloomberg terminal. Thanks

0:08:33.320 --> 0:08:35.800
<v Speaker 2>for tuning in to votes and verdicts and enjoy the

0:08:35.800 --> 0:08:36.920
<v Speaker 2>rest of your day or evening