Instacart, Lyft back in California political spotlight

App-based gig workers hold demonstration outside Los Angeles City Hall to urge voters to vote no on Proposition 22, a November ballot measure that would classify app-based drivers as independent contractors and not employees or agents, in Los Angeles, California, U.S., October 8, 2020. REUTERS/Mike Blake

Nearly two years after California voters approved a ballot measure to exempt gig-economy giants including Uber, Lyft, Instacart and DoorDash from a controversial state labor law, the political ripple effects of Proposition 22 are still reverberating across the Golden State — and could rear up in this year’s election.

First up: Instacart. Political observers this week noticed that Instacart, which as of last month was valued at $24 billion, had reached a tentative agreement with Gov. Gavin Newsom’s Office of Business and Economic Development for a $21 million California Competes Tax Credit, which is available to businesses that want to move to or stay and grow in the Golden State.

  • Under the tentative agreement — which could be approved at the tax credit committee’s next public meeting on April 21 — Instacart is required to “hire full-time employees and invest in office space, tenant improvements, computer equipment and furniture and fixtures as part of its expansion in San Francisco.” Without the tax credit, Instacart certified in its application, the “project may occur in another state.”
  • Willie Rudman, assistant deputy director of communications for the governor’s office of business and economic development, told me in a statement: “Award of the credit will incentivize Instacart to create 1,155 new, full-time jobs in California with average wages of $130,000 and not less than $55,000. … Instacart would also make at least $21 million of capital investments for additional office space in San Francisco to accommodate the growth. For further context, Instacart currently operates two U.S.-based headquarters in both San Francisco and Atlanta, Georgia. It has existing engineering, corporate and business support teams based out of its secondary headquarters in Atlanta that can house the company’s planned expansion.”
  • If Instacart doesn’t “fulfill all the terms of its agreement,” Rudman said, “the state will recapture the unearned credits.”

But the proposed deal didn’t seem to sit well with Lorena Gonzalez, who is incoming leader of the California Labor Federation and as a state Assemblymember authored Assembly Bill 5, the highly contentious law that made it harder for companies to classify workers as independent contractors and required them to offer more benefits.

Gig-economy companies poured nearly $206 million into Prop. 22 to exempt themselves from AB 5 — and saw their valuations soar by $10 billion the day after voters approved it. (However, there’s an ongoing legal battle over Prop. 22’s constitutionality.)

  • Gonzalez tweeted: “Just a reminder; Instacart spent tens of millions to pass Prop. 22 so they could avoid paying their workers minimum wage, unemployment insurance & social security, now they want a $21 million tax-credit.”
  • Instacart did not respond to a request for comment.

Meanwhile, Lyft has plowed more than $8 million into qualifying a measure for the November ballot that would hike taxes on Californians earning more than $2 million a year, the San Francisco Chronicle reports. Under the proposed initiative — also backed by various labor and environmental groups — the money would be used for funding rebates and other incentives for buying electric cars (45%), developing electric-vehicle infrastructure such as charging stations (35%), and preventing and suppressing wildfires (20%).

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