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Oct. 26, 2020, 2:22 p.m. EDT

In record-breaking $200 million fight to preserve the gig economy, messaging doesn’t always need money

By Levi Sumagaysay and Elisabeth Buchwald

If you live in California, Proposition 22 is impossible to ignore because of the work that gig companies have done to spread the word.

The most expensive ballot initiative in the state’s history is about to top $200 million in funding, mostly from gig-economy companies Uber Technologies Inc., Lyft Inc., Instacart, DoorDash Inc. and Postmates, which are seeking to exempt themselves from treating their workers as employees in accordance with state law. The money is being spent in ways that would feel familiar to most voters: Relentless ads on TV, radio and streaming services such as Google’s YouTube (NAS:GOOG) (NAS:GOOGL) ; campaign mailers that arrive in mailboxes nearly every day; and calls to vote for the measure following Californians around the web and on Facebook (NAS:FB) and Instagram. 

More on Prop. 22: How Uber and Lyft’s business model could be changed on Election Day

Beyond those channels, though, Uber (NYS:UBER) , Lyft (NAS:LYFT) and other gig companies are bombarding Californians with pro-22 messages by leveraging power that doesn’t involve money changing hands: By urging customers and workers to vote for the measure when they open their apps or use their services. This is a legal gray area that prompted a lawsuit against Uber last week, which included accusations that the company violated sections of the state labor code and the Unfair Competition Law, and have raised other questions related to free speech and data privacy.

The companies are deploying their engineers and other employees to help distribute or design hard-to-avoid, pro-initiative messages including DoorDash delivery bags emblazoned with support for Proposition 22, Uber requiring drivers and users to click “Yes on 22” before they are able to connect on a ride, and banner ads within the Instacart and DoorDash apps. Because the companies use employees’ time — effectively leveraging full-time employees in an effort to avoid adding to their ranks — the companies have had to quantify how much they have spent on these kinds of activities, in what are described as non-monetary donations. 

The gig companies have claimed $9.9 million in these types of expenditures as of Monday, according to campaign-finance records. They are categorized as non-monetary costs that are described as employee time, consulting and expenses, advertisements and more. The DoorDash bags were identified as campaign paraphernalia with an estimated fair market value of $100,500. Another expense listed as non-monetary, with a $48,350 value: DoorDash is paying people to place Yes on 22 ads on their vehicles. The company and the campaign say that’s being done via Wrapify, which pays any drivers, not just delivery workers, to drive around with ads on their cars.

Non-monetary charges are just roughly 5% of the $199.4 million collected by the campaign through Oct. 23, all but $100,000 of the total amount coming from the gig companies. In total, that is almost exactly the combined money raised by the top two U.S. Senate campaigns in this nationwide election cycle, according to filings through Sunday —Democrats Jaime Harrison of South Carolina ($109 million) and Amy McGrath of Kentucky ($90 million) — and the most ever raised in a California proposition campaign.

The Yes on 22 campaign has spent the biggest amount of its haul, $ 95 million, on TV, radio and online advertising airtime — almost five times the opposition’s entire campaign war chest of $19.2 million. About $55 million of that was spent in less than a month, between Sept. 20 and Oct. 17, during the run-up to and the early days of California’s early-voting period, which began Oct. 5.

Proposition 22 could go a long way toward protecting the gig economy, whose business model depends on minimizing the costs of on-demand labor and operations. The measure would exempt app-based platforms from a state law that went into effect in January, and instead offers new wage guarantees and benefits for workers while keeping them as independent contractors with fewer protections than employees.

The state of California has repeatedly told Uber and Lyft that they must live up to Assembly Bill 5, the law that was passed to formalize a new standard for employment that was set in a 2018 state Supreme Court ruling. The fate of the measure could affect lawsuits in California — in which the companies have repeatedly lost, most recently on Thursday — plus possible measures and legislation outside the state.

See: Uber and Lyft told to classify drivers as employees less than two weeks before California votes on the issue

Beyond breaking out their checkbooks, the companies have shown just how forceful they will be in these types of campaigns, which could spread to other parts of the U.S. as gig companies seek to protect their business models and avoid paying for benefits, unemployment insurance and other costs of employing workers. 

The in-app, pro-Prop. 22 messaging gives the companies an inherent advantage because they have a captive audience of workers and customers. In fact, after news reports about Uber drivers having to click on a Yes on 22 button before they could accept rides in the app, the company made adjustments to allow drivers to exit out of the pop-up.

As for how the campaign is accounting for those messages, campaign spokesman Geoff Vetter said, “Yes on 22 has disclosed these in-app ads as non-monetary contributions to the extent required by law.”

The time the companies’ employees have spent to get out those messages also raises legal questions, although the companies say they are properly accounting for that time in accordance with campaign disclosure laws.

A couple of ride-hailing drivers and nonprofits sued over that messaging Thursday in San Francisco Superior Court, saying “Uber has taken advantage of its raw economic power and its exclusive control over communications through its driver-scheduling app by wrongfully pressuring its drivers to actively support Proposition 22.” The company said the lawsuit is “absurd” and “without merit.”

According to Fair Political Practices Commission records, three complaints about Yes on 22 messaging are open and pending investigations. Three similar anonymous complaints were rejected. While the commission would not comment on the complaints, a spokesman for the FPPC said any political advertising must be reported and have the required disclosure about who paid for it.

Catherine Fisk, a professor at UC Berkeley, points to two sections of California labor code that say “no employer shall make, adopt, or enforce any rule, regulation, or policy… controlling or directing, or tending to control or direct the political activities or affiliations of employees” and “no employer shall coerce or influence or attempt to coerce or influence his employees through or by means of threat of discharge or loss of employment to adopt or follow or refrain from adopting or following any particular course or line of political action or political activity.” 

Fisk, who teaches labor and employment law, added: “Of course, the line between a company using staff to communicate the company’s own message and the company trying to control the staff’s own politics is fuzzy.”

Beyond the in-app ads supported by its own employees, the companies paid out plenty of money to spread their message everywhere else, through advertising. The Yes on 22 ads feature people talking about the flexibility the companies offer their workers and poll numbers that claim most gig workers want to remain independent contractors. 

As of Oct. 17, the most recent date for which expenditures are publicly available, the Yes on 22 campaign spent just shy of $66 million on TV ads since April, when it began airing them around the state.

Production costs for those commercials, including for camera operators, wardrobe stylists and set designers, total $11.7 million. Several people who appeared in both video and print ads were paid from $500 to more than $2,000. 

The campaign has spent $27.5 million on online ads on Facebook, Google, LinkedIn (NAS:MSFT) and mainstream publications such as the Los Angeles Times, San Francisco Chronicle, Sacramento Bee, San Diego Union Tribune, Southern California Newspaper Group and Politico. It has also spent $853,000 on radio ads.

By contrast, the opposition has spent about $10.2 million on overall advertising, including $8 million on TV commercials.

Meanwhile, the Yes on 22 campaign has also paid $6.8 million for polling and survey research, including $411,000 for polling and more to Berkeley Research Group, a consulting firm that is behind some of the “independent studies” the companies cite when they say most drivers want to remain independent contractors or mostly work part-time. 

The opposition points to research from the labor studies departments of universities such as UC Berkeley and UC Santa Cruz, which disputes the polls and studies often quoted by the Yes on 22 campaign. For example, gig companies say most of their drivers work part time, but researchers say the company’s services rely heavily on those who are working full time. 

See: Uber CEO says prices could double if drivers become employees, but this economist isn’t buying it

“You get a polling company to ask the right questions, you can get to whatever you want,” said Larry Gerston, political science professor emeritus at San Jose State University. “You have to take these things with a grain of salt.”

Another notable expenditure: The Yes on 22 campaign paid nearly $100,000 to the public relations firm of Alice Huffman, president of the state NAACP. The high-profile statewide civil-rights organization is a prominent supporter of Prop. 22, although some local NAACP branches do not agree with that stance. Endorsements by racial-justice groups could be significant because a majority of gig workers are minorities and immigrants.

The campaign has also placed advertising in smaller publications for certain groups, including Black Voice News, the Central Valley Voice, a publication that defines itself as a “minority publication,” the Los Angeles Sentinel, the Oakland Post and Our Weekly.

See: Race has played a large role in Uber and Lyft’s fight to preserve their business models

The campaign spent at least $877,000 on slate mailers, which are lists of propositions and candidates to support that are distributed by for-profit groups that have been paid by campaigns. One such mailer that had fine print saying it was prepared by “Feel the Bern, Progressive Voter Guide” drew a rebuke from Sen. Bernie Sanders, who tweeted on Oct. 12 that the mailer was a “lie” and called on Californians to vote no on Prop. 22 if they opposed “corporate greed.” 

Other big-ticket items listed as expenditures: About $4.7 million to campaign consultants, including Huffman’s PR firm; more than $2 million to the California Republican Party and the Republican parties of Ventura, Sacramento, Santa Clara and San Diego counties; more than $2 million for legal and accounting services; and a little over $1.2 million for phone banks.

One gig worker who spoke with MarketWatch could barely contain his anger about the campaign. “I’m sick of the lies on TV, all the money they’re spending,” said Denny, a gig worker in Los Angeles who asked that his last name not be used. “I know the truth. I’ve done Instacart for over three years. Sure, flexibility and independence are great. The only problem: It’s not worth it.”

Denny, who said he is semi-retired, said people have to consider that gig workers have expenses that should be factored into any examination of their pay. “We have taxes, gas, car insurance… commercial insurance is very expensive. There’s a whole laundry list.”

Denny said he made about $1,000 a week when the shelter-in-place orders began in March. “Two or three months later, Instacart added a lot of new shoppers, now you can’t make jack.” He is barely working now and is lucky if he makes $200 a week delivering groceries, he said.

Here are the total campaign contributions made by each of the biggest gig companies, most of which are still struggling to turn a profit: Uber gave more than $57 million, including non-monetary contributions and loans; Lyft was second with about $49 million; DoorDash followed with $48 million; Instacart gave nearly $32 million; and Postmates contributed more than $13 million. 

“Wish I ran a company that was ‘not profitable’ yet had eight-figure amounts of money to throw around,” said Tyler Breisacher of San Francisco, who delivers for DoorDash and Postmates. “It’s a ridiculous amount of money just to get out of giving workers the same rights and benefits that every other company has to give.”

Despite all the money it is spending, the campaign is also being accused of improperly cutting costs. The opposition has complained to the U.S. Postal Service about the Yes on 22 campaign using nonprofit postage rates for its mailers. In a letter to the U.S. Postmaster General, attorneys for the No on 22 campaign said the Yes side, which spent $3.5 million on postage through Sept. 19, appeared to have saved at least $1.5 million. In total, the campaign spent more than $9 million on postage, according to MarketWatch’s analysis.

Vetter, the spokesman for the Yes on 22 campaign, said: “As a 501(c)(4) organization, Yes on 22 is eligible for the appropriate non-profit postage rates with the USPS, which we applied for and were granted by the U.S. Postmaster.”

Link to MarketWatch's Slice.