Profitability Targets on the Line
There’s a lot to watch for on Election Day this year, including California’s Proposition 22. If passed, the proposition would allow app-based businesses to get around Assembly Bill 5, which went into effect in January and requires the companies to treat workers as full-time employees instead of independent contractors.
Uber (UBER) and Lyft (LYFT) have spent months, and hundreds of millions of dollars, highlighting the negative impact the reclassification would have on their business models. In August, both companies threatened to leave California if forced to reclassify workers. Neither company is profitable, and turning all contractors into full-time employees would affect revenue and profit metrics.
What Do the Polls Say?
In the leadup to the election, polling has exposed some inconsistent support for Prop 22 among voters. In August, two-thirds of California voters weren’t aware of Prop 22 at all. Over a third of voters were undecided.
Last month, polling by Redfield & Wilton Strategies suggested the proposition could pass by a narrow margin—53% of voters planned to vote in favor. A UC Berkeley poll, however, found that only 39% of voters planned to vote yes, and 25% of voters were still uncertain.
Outcome Could Impact Entire Gig Economy
Uber and Lyft aren’t the only companies that will be observing the outcome. More broadly, the results could reshape the gig economy. For example, this could impact companies like DoorDash, which rely on independent contractors.
In an interview last week, DoorDash’s CEO alluded to the fact that his company may also consider leaving the Golden State if Prop. 22 fails to pass. He said that his on-demand delivery startup is “prepared for all scenarios,” which is a sentiment Wall Street is embracing as well.
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