Sharing economy takes another hit as MA voters set low bar for drivers to unionize

The cost advantages of the sharing economy continue to dwindle as voters in Massachusetts approved a proposal to allow app-based drivers to form unions.

The threshold for union representation requires only 12.5% of drivers in the proposal, meaning the rest could face an unpopular union with limited support.

Known as Question 3 on the ballot, the proposal asked voters to approve a measure that would give transportation network drivers the right to form unions to collectively bargain with the companies. It passed 54% to 46% in last week’s election, reports the New York Times.  

The ballot question’s approval follows a settlement with the state by Uber and Lyft to raise the minimum wage for drivers to $32.50 per hour and pay a combined $175 million in fines.

Paul Craney, a spokesman for the Boston-based Fiscal Alliance Foundation, said months before November’s election that most voters won’t appreciate how extreme the ballot measure is for labor law.

“We have no doubt that most Massachusetts voters will not be aware of the radical and far-reaching consequences this question will have on labor law, if passed,” Craney said, according to the CommonWealth Beacon. “It will create a completely new labor category, and in violation of federal labor law.”

Indeed, the Bay State’s Sentinel and Enterprise newspaper criticized the latest ballot proposal, writing that collective bargaining for independent contractor drivers is likely to involve “serious legal challenges.” 

“Uber and Lyft drivers would also lose the independence they now enjoy and be forced to join a union that they might not support,” said the newspaper editorial. 

The Center for State Policy Analysis at Tufts University said a similar measure in Seattle was “ultimately gutted” by the courts.

The center also noted approval of Question 3 “would likely increase the cost of rides and curtail usage. This would limit some of the known benefits of the apps, including reduced drunk driving and expanded mobility options.” 

Earlier in the week, Uber warned New York City that the company may be forced to lay off thousands of drivers there if the agency responsible for pay standards for taxis and limousines (known as TLC) decides to raise the minimum wage for drivers.   

Uber’s chief economist warned that raising wages ultimately leads to a death spiral that would make ride-sharing companies such as Uber uneconomical for consumers.  

“[I]f this trend continues, permanent reductions in the number of drivers on the platform will be needed to avoid a harmful spiral embedded in TLC’s regulations, in which lower utilization rates lead to higher prices, which in turn lead to lower utilization rates,” said Rodrigo Moser, Uber’s senior economist.  

Moser shared a chart of data compiled by the New York City agency showing ride-sharing has fallen dramatically in the city since 2022 as wages and prices have increased.   

In September 2024 ride-sharing companies experienced negative growth in New York after growing by 40% just two years earlier. 

In California, the Legislature previously tried to outlaw the use of independent contractors for companies like Uber and Lyft, but voters carved out an exception for app-based transportation services in 2020 under Proposition 22.   

In Pennsylvania, Republicans in the Legislature are pushing for a basket of “portable benefits” paid for by a company contribution of up to 4% of drivers’ pay in return for legal recognition that the drivers are “independent contractors” under Pennsylvania labor laws, PennLive reports. 

“It’s time for our governing bodies to wake up,” Moser warned. “You can increase prices all you want – but if fewer people are taking fewer trips, you end up hurting the people you’re trying to help.”