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The Gig is Up! Californian’s Speak on the Future of an Uber/Lyft Economy

December 1, 2020

Not to be lost in last month’s presidential election headlines, California’s continuing debate and legal battle over how to classify its gig economy workers may have been resolved (for now) with the passage of California’s Proposition 22.  The magnitude of Proposition 22’s passage and its impact on gig workers in California is enormous with expected shock waves to be felt across the country.

Proposition 22 was an Uber-led movement designed to exclude drivers for app-based delivery and transportation services (think Lyft, Uber, GrubHub, etc.) from the reach of Assembly Bill 5 (“AB 5”), a 2019 state law which revamped how gig workers were to be treated in California.   In its efforts to garner passage of Proposition 22, the Uber-led coalition outspent its opposition by nearly 10 to 1, making the $220 million spent by both sides on this ballot initiative by far the costliest in California state history.

What was at stake? 

With the passage of Proposition 22, these Uber-like businesses essentially became exempt from having to comply with AB 5 (click here to read prior Brody and Associates article on AB 5).  As we have previously discussed, AB 5 was designed to protect the growing independent contractor gig workforce in California by providing them with the greater job protections and benefits of an employee.  Historically, independent contractors, especially gig workers, didn’t enjoy the same legal rights and benefits as workers classified as employees (click here to learn more about California’s ABC Test).

This was not the first attempt by these businesses to skirt the reach of AB5.  Previously, these businesses failed to gain support with California’s State legislature to have AB 5 written to exclude them, and when those efforts failed, they went to court where they once again failed.  As a result, the Uber-led coalition took the issue to the people of California in the form of Proposition 22.

The passage of Proposition 22 was a huge win for app-based delivery and transportation services.  Had they not received this exemption, these companies would have been required to treat hundreds of thousands of workers as employees, which the industry claims would have crippled it. Instead, Proposition 22 allows app-based ride-hailing and delivery companies to continue treating their workers as independent contractors, which means no job protection benefits, no unemployment benefits, and no paid time off for these workers.

With the passage of Proposition 22, however, there are a few bright spot for gig workers including (i) the right to receive pay equal to 120% of the minimum wage while the workers are “active”, (ii) a stipend to purchase health care if the worker achieves a minimum threshold of hours worked and (iii) coverage by a worker’s compensation type of coverage for workers who are injured while working.

Brody and Associates regularly advises management on complying with the latest state and federal employment laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.