What the Passage of California’s Prop 22 Means for Gig Workers

November’s controversial ruling will fundamentally alter working conditions for transportation gig workers in California and likely affect other gig industries in time.

The most hotly contested and costliest legal ballot in the history of the state of California has just ruled in favor of the tech corporations responsible for championing it. Read on to learn what Proposition 22 means for you and how it’s forecasted to affect gig workers and employers across the country.

What is Proposition 22

California Proposition 22 — also known as the 2020 App-Based Drivers as Contractors and Labor Policies Initiative — was put to the ballot on November 3, 2020 and approved by 58.38% of participating California voters. Through a “yes” vote, the proposition pushed to define app-based rideshare and delivery drivers as independent contractors in order to exempt tech giants like Lyft, DoorDash, Instacart, and Uber from having to treat their gig workers as full employees under the law.

This distinction in worker classification is important due to the stark differences in protections and employer benefits afforded to full-employees versus independent contractors such as minimum wages, health insurance, collective bargaining power (via unions), and unemployment benefits.

This distinction in worker classification is important due to the stark differences in protections and employer benefits afforded to full-employees versus independent contractors such as minimum wages, health insurance, collective bargaining power (via unions), and unemployment benefits.

Prop 22’s relationship with Assembly Bill 5

The initiative was the result of an $200 million campaign on behalf of the same transportation-tech companies to aggressively counter the effects of 2019’s California Assembly Bill 5 (AB5), which gave the state the right to determine a worker’s status in a generalized bid to stop companies from taking advantage of their workforce by purposely misclassifying them.

Under AB5, most workers are already presumed to be employees unless an employer can prove the following 3 points via the ABC method:

(A) “The person is free from the control and direction of the hiring entity when performing the work, both under contract and in fact.

(B) The people perform work that is outside the scope of the business’s usual day-to-day activities.

(C) The person customarily engages in an independently established trade, occupation, or business of the same nature as that in the work they perform.

After a California court ordered Uber and Lyft to reclassify their independent contractors as employees back in August 2020, both companies appealed and threatened to end their west coast operations for good, claiming that AB5 would result in irreparable harm to their signature business model of cheap rides and flexible working arrangements.

Mixed reception

Proponents see the approval of Prop 22 as a monumental corporate victory, while critics see it as a regression on basic rights.

Proponents see the approval of Prop 22 as a monumental corporate victory, while critics see it as a regression on basic rights. Reaching the highest levels of government, even president-elect Joe Biden and vice-president-elect Kamala Harris have publicly opposed Prop 22 and have even included the creation of a federal version of AB 5 in their campaign promise.

And they’re far from the only ones criticizing it. The Guardian cited Robert Reich, former United States Secretary of Labor saying, “Prop 22 is great for employers, but it’s a huge loss for workers. This will encourage other companies to reclassify their work force as independent contractors, and once they do, over a century of labor protections vanishes overnight.”

For Stockton Mayor Michael Tubbs, “Prop 22 embodies the opposite of racial equity as it would leave Black and Brown drivers with NO sick pay, NO workers’ compensation and NO unemployment insurance because the app companies wrote the initiative to take these benefits away.”

Nonetheless, key players in support of Prop 22 (such as Uber CEO Dara Khosrowshahi) feel emboldened by the result and have publicly vowed to expend significant time and resources to ensure that similar rulings are passed in other states and potentially worldwide:

“Going forward, you will see us more loudly advocate for new laws like Prop 22, which we believe strike the balance between preserving the flexibility that drivers value so much, while adding protections that all gig workers deserve,” Khosrowshahi said, adding that “it’s a priority for us to work with governments across the U.S. and the world to make this a reality.”

Additional effects of Prop 22 on drivers

Whether it’s just for optics or a last-minute attempt to grant workers some additional protections, Prop 22 includes other labor and wage policies specially designed to benefit app-based transportation drivers and companies.

Ballotpedia’s in-depth article on Prop 22 lists the following changes:

• App-based drivers receive payments for the difference between their net earnings (excluding tips) and a net earnings floor based on 120% of the minimum wage applied to a driver’s engaged time and 30 cents per engaged mile (adjusted for inflation after 2021)

• App-based drivers can’t work more than 12 hours during a 24-hour period unless the driver has been logged off for an uninterrupted 6 hours

• Drivers who average at least 25 hours per week of engaged time during a calendar quarter will require companies to provide healthcare subsidies equal to 82% the average California Covered (CC) premium for each month

• For drivers who average between 15 and 25 hours per week of work during a calendar quarter, companies must provide healthcare subsidies equal to 41% the average CC premium for each month

• Companies must provide or make available occupational accident insurance to cover at least $1 million in medical expenses and lost income resulting from injuries while a driver was online

• Companies must ask occupational accident insurance to provide disability payments of 66% of a driver’s average weekly earnings during the previous four weeks before the injuries suffered (while the driver was online but not engaged in personal activities) for upwards of 104 weeks (about 2 years)

• Employers must provide or make available accidental death insurance for the benefit of a driver’s spouse, children, or other dependents when the driver dies while using the app