June 17, 2020 – Pacific Gas & Electric pleads guilty, DoorDash battles legal trouble and the Trump Administration continues its fight against internet companies.
Today’s newsletter is 1415 words, a 9-minute read. Let’s get to it:
Pacific Gas & Electric Pleads Guilty, But Clears A Major Bankruptcy Hurdle
It’s uncommon for U.S. corporations to face homicide charges. It’s even more unusual to face 84 of them. But California utility company Pacific Gas & Electric pleaded guilty to all 84 counts of manslaughter and one count of unlawfully starting a fire it was facing Tuesday admitting its culpability in the “Camp Fire,” the deadliest blaze in state history. Meanwhile, in a separate courtroom in San Francisco, a U.S. bankruptcy judge stated his intention to approve PG&E’s $59 billion reorganization plan.
Why It Matters
PG&E officially joins an exclusive club – one of the few U.S. corporations to be convicted of homicide charges. And, it’s mind-blowing to process the negligence that cost 100 people’s lives and 15,000 homes. According to prosecutors, PG&E decreased the frequency and thoroughness of transmission-line inspections over several decades, sometimes in the interest of saving money and ballooning corporate profits. And the company knew its risk was elevating and did little to assess or address it.
The tough part is there’s really no short-term resolution. The company agreed to all-cash settlements with insurers and local governments before settling with victims. Those impacted by the fire will receive partial stock compensation, but with so much in flux due to the bankruptcy process, it’s unclear when they’ll be able to cash out. Some victims and their lawyers pushed to renegotiate this deal, citing the risks it exposes them to.
It’s sad, but the winners here are hedge funds and others who bet on PG&E’s recovery – the company is expected to exit Chapter 11 later this year. They’re primed to make billions from the bankruptcy plan, which The Wall Street Journal called “a complex compromise between shareholders and debtholders.”
Numbers to Consider
- $3.48 million – The statutory maximum penalty for pleading guilty to one count of unlawfully causing a fire, which PG&E agreed to pay.
- $30 billion – PG&E filed for bankruptcy in January 2019 after citing this amount in liability claims.
- $13.5 billion – The amount PG&E agreed to pay victims of the fire, half of which is to be paid in company shares through a trust.
San Francisco DA sues DoorDash for classifying delivery workers as independent contractors
Even though it’s kind of a weird way to announce a lawsuit, San Francisco District Attorney Chesa Boudin tweeted his office would be bringing charges against DoorDash for engaging in unfair labor practices. The basis of Boudin’s argument stems from DoorDash’s “illegally misclassifying employees as independent contractors.”
“Misclassifying workers deprives them of the labor law safeguards to which they are entitled, denying workers minimum wage and overtime pay, unemployment insurance and protection from discrimination, among other things,” Boudin said in a press release, according to Tech Crunch. “[…] Now, more than ever, with the COVID pandemic, we must protect our workers, especially those essential workers who are delivering food to us each and every day.”
Why It Matters
The line between employee and independent contractor continues to be debated and redrawn, especially as gig economy companies such as DoorDash, Lyft and Uber continue to grow.
The government passed AB 5, an outline to determine who can and cannot be classified as an independent contractor, earlier this year as a direct result of Dynamex Operations West, Inc. v Superior Court of Los Angeles creating the precedent of judging employment by the ABC test.
“According to the ABC test, in order for a hiring entity to legally classify a worker as an independent contractor, it must prove the worker is free from the control and direction of the hiring entity, performs work outside the scope of the entity’s business and is regularly engaged in work of some independently established trade or other similar business. In the suit, Boudin describes how DoorDash does not meet the standards put forth by the ABC test,” Tech Crunch writes.
The book isn’t closed, and it’s a wait and see on how this law evolves. DoorDash, Uber, Lyft, Postmates and Instacart are funding a ballot measure that would make it legal to utilize independent contracts the way they’re accustomed to.
Numbers to Consider
- $2,500 – The maximum fine DoorDash faces for each violation of incorrectly classifying workers as independent contractors.
Full Story: (TECH CRUNCH)
Justice Department to Propose Limiting Internet Firms’ Protections
The Justice Department is proposing reforms to reduce the legal protections afforded to internet companies to make them more responsible for how they police their content. The move comes a month after President Trump signed an executive order targeting the legal protection of social media companies.
Why It Matters
Any new law would basically unseat Section 230 of the Communications Decency Act of 1996. Under this law, internet platforms are “generally not legally liable for actions of their users, except in relatively narrow circumstances,” according to The Wall Street Journal.
“Those protections would be scaled back in significant ways under the Justice Department’s proposal, which seeks, in essence, to prevent platforms from taking down content without offering reasonable rules and explanations—and following them consistently. It also would make platforms more responsible for third-party content in other areas such as online commerce,” The Journal writes.
Tech companies argue that Section 230 is “fundamental to the internet economy’s smooth functioning.” But there’s been criticism from both sides of the aisle that the protections are “outdated and no longer needed in an age of internet giants.”
Numbers to Consider
- 3.81 Billion – The total number of social media users on the planet, according to Data Reportal.
- $52.7 Billion – The value of the U.S. social media market, according to IBIS World.
Full Story: (WALL STREET JOURNAL)
A Quick Look
HSBC Restarts Plan to Cut 35,000 Jobs
- In direct response to the coronavirus pandemic, HSBC Holdings PLC plans to cut approximately 15 percent of its workforce. In February, the bank said it would shed 35,000 jobs. In the medium term, Chief Executive Noel Quinn said the workforce would shrink to 200,000 from 235,000.
- HSBC earns most of its profit in Hong Kong and mainland China. The bank set aside $3 billion to cover potential loan losses as its net profit dropped 57 percent to $1.79 billion in the first quarter of this year.
Read: (WALL STREET JOURNAL)
After merger, T-Mobile lays off hundreds of Sprint employees
- Just two months after its $26 billion merger with Sprint was finally completed, T-Mobile announced layoffs. In an open letter last April, then-chief executive John Legere claimed “New T-Mobile” will have more than 11,000 additional employees on staff by 2024.
- According to Tech Crunch, T-Mobile vice president James Kirby told hundreds of Sprint employees that “their services were no longer needed.” He’s also saying the layoffs would make way for 200 new positions and encouraged employees to apply.
Read: (TECH CRUNCH)
Worth Your Time
A Long-Awaited Shift: After years of ignoring the performance capabilities of Mac computers, Apple is finally transitioning its computer series to its ARM chips. It’s been rumored for a while – it was only a matter of time before Apple started using its high-performance mobile chips in computers – and opens up new performance, cost-effectiveness and streamlining opportunities for the company as they sunset its Intel chips. (LINK – STRATECHERY)
Heading For The Exits: “The coronavirus is challenging the assumption that Americans must stay physically tethered to traditionally hot job markets—and the high costs and small spaces that often come with them—to access the best work opportunities. Three months into the pandemic, many workers find themselves in jobs that, at least for now, will let them work anywhere, creating a wave of movement across the country.” (LINK – WALL STREET JOURNAL)
Platform Power: After raising another $80 million in Series E funding, Contentful is approaching a $1 billion valuation. It’s possible you’ve never heard of this company, but currently, 28 percent of Fortune 500 companies manage their content using Contentful’s platform. (LINK – TECH CRUNCH)
Two-Wheel Transaction: Jump bikes and scooters are on the verge of becoming a relic of our past, sitting inside a warehouse waiting for Lime to figure out what to do with them. This comes as a result of Lime’s acquisition of Uber’s “micro-mobility” subsidiary, which closed in Europe officially today after doing so in the U.S. a few weeks ago. (LINK – TECH CRUNCH)
A Couple Cents Content
I wrote about the history of Tik Tok and the instrumental role its acquisition of Musical.ly played in the app’s success (POST)
Austin Hankwitz recapped his strategy on when to sell your stocks (POST)
See you tomorrow!
— Justin Birnbaum