California Governor Gavin Newsom has struck a deal with Uber and Lyft that (1) will unionize drivers, and (2) deliver big cost cuts to the ridesharing platforms. But it’s the unions themselves that will benefit most; helpful to the Governor as he prepares for a presidential run.

Uber and Lyft will see a 70% – 94% reduction in how much insurance they have to carry, and while unions will be able to collect dues they won’t get much bargaining leverage.

Uber and Lyft Get To Carry Far Less Insurance

Currently, rideshare platforms in California have to carry $1 million in uninsured/underinsured motorist coverage per driver, per accident. Uber and Lyft complained that this was far higher than what taxis have to carry. They argued this was unnecessary and a magnet for lawsuits.

The California Public Utilities Code requires taxis to maintain liability insurance of $100,000 per person, $300,000 per accident, and $50,000 for property damage. There’s some slight variance at the city and county level to this.

Under the compromise,

• Uninsured motorist coverage drops to $60,000 (so less than taxis!)
  
• $300,000 per accident cap (if multiple people are injured)

The per-driver insurance requirement drops by 94% and the per-accident maximum drops by 70%. I haven’t found public disclosure of actual policy premiums, but it seems that minimum savings would be in the tens of millions of dollars (but could be nine figures).

Meanwhile, this shifts risk onto drivers and riders. Victims might be left to pursue drivers personally, and the average Uber driver is likely judgement-proof.

Drivers Get A Union With Basically No Bargaining Leverage

This trade gets Uber and Lyft to sign onto collective bargaining rights.. without actually harming their businesses.

• Normally you might need a majority of employees to sign union election cards before holding a union certifying vote. There’s nothing like that here. Just 10% of drivers need to support a specific union, and then that union asks the state to certify them.

• Precisely because rideshare drivers are transient, and aren’t even employees, it would be hard to organize them and get majority support for a union. But the union that gets bargaining rights will be able to charge dues, taxing rideshare drivers, but won’t be able to claim broad legitimacy.

• Since 90% of rideshare drivers may not have supported the union effort, getting solidarity for a work action is going to be similarly tough.

• For the union to be effective in negotiations, it needs to be able to make a credible strike threat. But it seems like a long shot they’ll have this. A large percentage of drivers are likely to cross ‘virtual picket lines’.

• Note also that many rideshare drivers are economically vulnerable, hardly in a position to turn off their apps and forgo income. Without a strike fund, convincing them to do so will be tough – it’ll be individually rational to free ride on bargaining efforts (let other drivers strike while each individual drives).

• A strike doesn’t ‘shut down’ Uber like a factory strike shuts down a physical plant. Even getting a sizeable number of drivers to refuse to log on just means longer wait times, which can be offset by incentives to lure others onto the road.

• Under California Prop 22, drivers are still independent contractors, not employees, and have no legal “right to strike” protection in the classic labor law sense (no NLRA coverage, no anti-replacement rules).

  Platforms already face constant churn (many drivers quit within months). This creates a standing pipeline of applicants ready to be activated. If a strike hit, Uber/Lyft could ramp up “earn $500 for your first 50 rides”-style promotions to flood the system with replacements. And anyone with a car that meets standards can sign up in a matter of days.

Drivers don’t gain a lot of leverage here in exchange for the dues they’ll pay. Uber doesn’t face really high costs, and probably saves more in insurance premiums. So risk gets shifted to riders and other drivers on the road, while unions gain more dues.

Governor Newsom gets an important win with an important Democratic constituency, without delivering real benefit to rank and file drivers, and at the cost of his state’s residents (if they ever get into an accident as a passenger, or into an accident with a rideshare driver).

I’m no expert on California law or politics, so I’d love to know what I am missing. It seems like rideshare drivers are taking this on the chin, while being told they’re winning. Remember when tipping was supposed to raise driver pay, but driver pay has gone down since it was implemented?