Wednesday, January 27, 2021
News + Politics Breaking the law and abusing workers plays well on...

Breaking the law and abusing workers plays well on Wall Street

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Breaking the law repeatedly, enabling thousands of evictions, ducking your taxes, overturning state labor codes, and abusing your workers seems to be a recipe for immense wealth these days.

Both Airbnb and Doordash had wildly successful initial public offerings in the past few weeks, making their founders immensely rich.

Ron Conway, an early investor in Airbnb, also saw his net worth soar.

A protest against Airbnb.

So let’s go over this a bit.

Doordash contributed $48 million to the campaign to pass Prop. 22, which overturned California labor law and allow delivery companies and Uber and Lyft to avoid treating their drivers as employees.

The IPO, which came in the wake of that measure’s passage, saw the company’s net value rise to $72 billion and brought in $3.4 billion cash.

So $48 million was a cheap price to pay.

Yes, the fate of its workers was a key issue for Doordash. In the company’s S1 filing – required when a company seeks to sell shares on Wall Street – I found the following:

Our pay model for Dashers, particularly with respect to tips for Dashers, has previously led, and may continue to lead, to negative publicity, lawsuits, and government inquiries. …

Further, while we maintain that Dashers that utilize our platform are independent contractors, there is a risk that Dashers may be reclassified as employees under federal or state law. As discussed further below, we have been involved in and continue to be involved in numerous legal proceedings related to Dasher classification, and such proceedings have increased in volume since the California Supreme Court’s 2018 ruling in Dynamex Operations West, Inc. v. Superior Court, or Dynamex, including an action brought by the San Francisco District Attorney in June 2020. 

Even with the passage of the 2020 California ballot initiative and similar legislation, such initiatives and legislation could still be challenged and subject to litigation. In addition, we could face further challenges to the classification of Dashers that utilize our platform as independent contractors as other states where we operate are considering adopting similar legislation or regulations. A reclassification of Dashers or delivery service providers using a local logistics platform as employees could require us to revise our pricing methodologies and pay model to account for such a change to Dasher classification, and to make other substantive internal adjustments to account for any transition of a Dasher to an employment position, which would have an adverse impact on our business, financial condition, and results of operations

The passage of Prop. 22 clearly convinced investors that the threat of any sort of fair labor practices – that is, paying drivers a minimum wage and benefits and covering their social security and disability – wasn’t enough of a concern to dampen the share price.

The message: If you put up enough money to overturn labor regulations, you reap a huge windfall from Wall Street.

Then there’s Airbnb.

This is a company that was founded on a business model that violated local laws in almost every community where it operated. Every single Airbnb listing in San Francisco was illegal for years. The company paid no hotel taxes for years.

Under the administration of the late Mayor Ed Lee, the city did nothing to enforce its laws against short-term rentals. The biggest contributor to Ed Lee’s election was Conway, who put up some $600,000.

He also raised or put up six figures to get Sup. David Chiu elected to the state Assembly over Sup. David Campos.

Chiu carried the legislation that legalized Airbnb in San Francisco. Mayor London Breed was the sixth vote to make it happen. Campos opposed it.

Conway raised money and pushed hard to get Breed elected mayor.

That, of course, was a great deal for Conway: As one of the early investors, he has made many millions off the Airbnb IPO.

Getting rid of pesky local regulations was a concern for Airbnb’s IPO. From the S1:

Since we began our operations in 2008, there have been and continue to be legal and regulatory developments that affect the short-term rental and home sharing business. Hotels and groups affiliated with hotels have engaged and will likely continue to engage in various lobbying and political efforts for stricter regulations governing our business in both local and national jurisdictions. Other private groups, such as homeowners, landlords, and condominium and neighborhood associations, have adopted contracts or regulations that purport to ban or otherwise restrict short-term rentals, and third-party lease agreements between landlords and tenants, home insurance policies, and mortgages may prevent or restrict the ability of hosts to list their spaces. In Europe, a group of mayors representing 22 cities (including Amsterdam, Barcelona, and London) has been meeting with the European Commission to seek increased regulatory control in relation

 to short-term rental platforms. These groups and others cite concerns around affordable housing and over-tourism in major cities, and some state and local governments have implemented or considered implementing rules, ordinances, or regulations governing the short-term rental of properties and/or home sharing. Such regulations include ordinances that restrict or ban hosts from short-term rentals, set annual caps on the number of days hosts can share their homes, require hosts to register with the municipality or city, or require hosts to obtain permission before offering short-term rentals. In addition, some jurisdictions regard short-term rental or home sharing as “hotel use” and claim that such use constitutes a conversion of a residential property to a commercial property requiring a permitting process. Macroeconomic pressures and public policy concerns could continue to lead to new laws and regulations, or interpretations of existing laws and regulations, that limit the ability of hosts to share their spaces. If laws, regulations, rules, or agreements significantly restrict or discourage hosts in certain jurisdictions from sharing their properties, it would have a material adverse effect on our business, results of operations, and financial condition.

But no worries: With enough money and political clout, all of these problems can be resolved.

Never mind that thousands of tenants in San Francisco lost their homes while Airbnb operated illegally and its hosts turned what used to be housing into illegal hotel rooms.

Never mind that during a pandemic, people desperate to pay the rent are working for what should be illegal wages driving takeout meals from restaurants with no health insurance, no disability, and no job stability.

It was all in the interest of an ultimate IPO that would make a few people like Ron Conway very rich.

And San Francisco elected officials who were backed by Ron Conway let it happen.

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.

2 COMMENTS

  1. This is why we need real grassroots organizing instead of nonprofiteers who see SF progressive politics as their own personal game of monopoly. This model of organizing does not deliver shit in outcomes other than secure jobs.

    At the end of the day, this means that the nonprofiteers like their sinecures more than they like achieving their stated policy goals.

  2. this is why you need a real Attorney General in Washington, not just someone who focuses on executing people by bringing back firing squads and electrocution. Elizabeth Warren could put a stop to this type of law breaking to make criminals rich, unfortunately she comes from a state with a Republican governor

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