For both Uber and Lyft, the prospect of being compelled in their home state to completely overhaul how drivers are compensated is an existential threat. (Photo: Shutterstock)

Faced with legislation in California that endangers their business model, Uber Technologies Inc. and Lyft Inc. are urging a compromise that would keep their drivers from being considered employees.

“We can make independent work better if we update century-old employment laws,” Uber Chief Executive Officer Dara Khosrowshahi and Lyft co-founders Logan Green and John Zimmer wrote in a rare, jointly written opinion column published Wednesday in the San Francisco Chronicle. “Many drivers are offering ideas to improve their experience, and companies like ours have a responsibility to come to the table prepared to do our part.”

Related: Uber and Lyft drivers to strike: A new labor movement?

The executives' public appeal follows months of private efforts by the ride-share giants and other companies to secure support from California's governor, state lawmakers, and labor leaders for some deal to shield them from a sweeping 2018 state supreme court ruling that makes it difficult for firms to claim their workers aren't employees.

Whether Uber and Lyft drivers remain independent contractors or must be treated like employees goes to the heart of the on-demand economy's reliance on a casual labor force to keep costs down. For both companies, which just went public, the prospect of being compelled in their home state to completely overhaul how drivers are compensated is an existential threat.

Under the April 2018 ruling known as Dynamex, workers are employees entitled to state wage-law protections unless they are conducting “work that it outside the usual course” of the company's business. For companies whose core service is transporting customers via an army of drivers they claim are all contractors, that could be a challenging test to pass.

In their Wednesday op-ed column, Khosrowshahi, Green and Zimmer say drivers value the flexibility that comes with being treated as contractors. “Very few jobs allow you to start or stop working whenever, wherever, as often as you want,” they wrote. Rather than forcing the companies to classify them as employees, they say, California should embrace an alternative: Let them keep treating drivers as contractors, but guarantee the drivers some minimum pay during the time they're picking up and dropping off passengers; create a company-supported benefits fund for perks like paid time off; and establish an association for drivers to advocate for further improvements.

“Today in California,” they write, “we have an opportunity to work with legislators and labor groups to find a different solution that preserves drivers' ability to work independently if they choose to do so while improving the quality and security of their work.”

Platform companies in industries like food delivery, as well as the ride-hail firms, have also been discussing similar proposals with leaders of unions, including affiliates of the International Brotherhood of Teamsters, Service Employees International Union and United Food & Commercial Workers, according to people familiar with the discussions.

Vikrum Aiyer, Postmates vice president of global public policy, said the company has found some in labor to be “willing to at least brainstorm with us” and to “coalesce around what the contours of a better social contract can be,” something he said he hopes could become a national model.

Union leaders declined to directly discuss the status of their talks with gig companies.

Rights, benefits

“Every single worker in California deserves the right to organize, a living wage, benefits like health care and retirement, and a voice to set standards in their industry,” Doug Bloch, political director for a regional Teamsters chapter, said in an emailed statement. “We are committed to supporting gig workers in their fight for all those things.”

Bob Schoonover, president of SEIU California, said gig-economy workers “have gotten the short end of the stick for too long.” Their activism, he said, has “created momentum that can't be denied, and the companies they work for now recognize they must do better.”

Some labor leaders are cool to compromises like the one put forward Wednesday by Uber's and Lyft's executives.

Such terms are “woefully short of the protections gig workers are entitled to under current law,” Steve Smith, a spokesman for the state's AFL-CIO chapter, said in an emailed statement.

Cesar Diaz, legislative and political director for California's building and construction trades council, said deals cut with app-based companies risk undermining labor standards much more broadly.

“Any deal that makes a worker who is justifiably an employee into an independent contractor — taking away their benefits and protections in current law today — is a bad deal,” he said.

In May, California's Democrat-dominated state assembly passed legislation that, if approved by the state senate and governor, would codify the Dynamex ruling's broad definition of an employee and apply it, with exceptions, to a wide swathe of state laws.

Newsom review

California Governor Gavin Newsom, also a Democrat, has been meeting with labor leaders and executives from major gig companies about the issue, according to people familiar with the matter. Newsom spokesman Brian Ferguson said that if the legislation codifying Dynamex reached his desk, “it would be evaluated on its own merits.”

Whatever happens in California will reshape the national debate over the rights and roles of gig workers.

Democrats in Congress, including six senators running for president, last month sponsored a bill that would make a test like Dynamex's the standard for which workers have the right to unionize under federal law.

“Clearly this whole movement to quote-unquote independent contractors has been a way to skirt the basic protections that workers are entitled to,” Vermont Senator Bernie Sanders said in an interview last week. Sanders has asserted on Twitter that Uber and Lyft drivers are employees,

In an April filing for its initial public offering, Uber said that requiring its drivers to be treated as employees “would require us to fundamentally change our business model, and consequently have an adverse effect on our business and financial condition.”

“Our companies are no longer upstarts,”the Uber and Lyft executives wrote in their Wednesday op-ed. “We are public companies that tens of millions of people rely on for mobility and for work. If there ever was a time for new policies, it's now.”

–With assistance from Eric Newcomer.

Read more: 

• Uber settles thousands of driver misclassification claims
• Employers could win big on latest DOL gig worker decision
• Gig workers' importance to grow over next 5 years

Copyright 2019 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.