In what could be the final chapter in the “Uber Saga” (a title this blog has dubbed the ongoing legal wrangling between labor rights activists and the corporations behind Uber, Lyft and other gig-economy tech platforms), California’s Proposition 22 was passed on Election Day 2020.
For those who may not have been following our coverage on this case as it wended its way through California’s legal system, at issue has been a contentious debate over whether workers using gig economy web platforms like Uber – where drivers using their own vehicles to provide taxi-style service to end-users of the Uber platform and have been classified as Independent Contractors in the engagement – should continue to be so classified.
Supported by more than $200 million from Uber, Lyft, DoorDash, Instacart and Postmates, Prop 22 is the most expensive ballot measure in the history of the Golden State. The eye-popping level of spending in support of the ballot initiative underscores just how much the gig platform companies stood to lose if they were forced to classify their driver/users as employees as opponents of the measure wanted.
Prop 22’s full title, “App-Based Drivers as Contractors and Labor Policies Initiative” overrules a newer law passed by the California State Assembly in January 2020 – Assembly Bill 5. AB5 required gig economy apps to utilize the same ABC test used by other contingent workforce management operations to determine whether an employee was entitled labor protections and benefits as W2 earners or whether they met the criteria for IC classification. AB5 was intended to make it more difficult for gig apps to avoid paying benefits for drivers which proponents believe they’re entitled to.
Prop 22’s critics say the ballot measure intentionally hobbles the underlying motivation for AB5 which was hailed as a step toward shielding workers being exploited by gig companies. While it is true that Prop 22 did carve out some special dispensations for gig app workers. Most notably “ride-hail and delivery drivers” will continue to be treated as ICs but minimum earnings are to be guaranteed based on “engaged time” which is defined as the time when drivers are fulfilling a ride or delivery request, but does not include the time they spend waiting for their next fare. However, Prop 22 conspicuously avoids offering protection for workers like workers’ comp, family/sick leave, unemployment insurance and it explicitly disallows workers to form a union.
The case has been closely watched by workforce management leaders in all industries as the outcome of this high-profile battle will likely have implications for how gig economy companies operate in other states around the US. Stocks for Uber and Lyft rocketed upward in the aftermath of Prop 22’s passage as it rendered null a California appeals court ruling that just two weeks before the election instructed Uber and Lyft to reclassify their drivers as employees as opposed to ICs. The court threatened to shut these companies down if they didn’t comply, but the court order was suspended until the election to allow the will of the voters to be considered.
It is unclear if this will be the final and definitive word on this contentious issue, though for now, the industry, the stock market and the public will move ahead according to guidelines spelled out in Prop 22. It would seem that for the time being, this issue has been put to rest. Have questions on proper IC classification in your organization? Ask the experts at nextSource.