California Voters Pass Proposition 22, Allowing App-Based Ride Share and Food Delivery Companies to Treat Drivers as Independent Contractors
As we have written here before, ride share and food delivery companies doing business in California had a lot at stake in the November 3, 2020 election. In fact, it was possible that those businesses might even cease doing business in California depending on the outcome of the election – or dramatically change their business models in the state.
Specifically, on November 3, 2020, California voters were asked to decide the fate of Proposition 22, the ballot initiative that would remove those companies from the scope of AB 5 and allow drivers to be treated as independent contractors. (As we explained here, AB 5 codified and expanded the controversial “ABC” test adopted by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court for determining whether workers in California should be classified as employees or as independent contractors.)
Depending on sources, ride share and food delivery companies spent between $110 million and $200 million on the campaign to pass Proposition 22.
Their campaign seems to have paid off. While the votes are still being tallied at the time this post is being written, it appears that Proposition 22 has passed with approximately 58.4% of the votes.
There is more than a great deal of irony in the apparent passage of Proposition 22. It is no secret that AB 5 was aimed at forcing ride share and food delivery companies to treat drivers as employees. Now, the very industries at which the legislation was directed are excluded from it.
While app-based ride share and food delivery companies will be able to treat drivers as independent contractors going forward (with some wage and benefit concessions found in Proposition 22), there may be some uncertainty about whether or how the passage of Proposition 22 will impact pending litigation challenging the status of the drivers pre-Proposition 22. Unlike Proposition 11, the meal and rest period initiative in the emergency services industry that California voters passed in 2018 – and that expressly provided that it was clarifying existing law and would apply retroactively – Proposition 22 does not expressly include such provisions.
Once immediate consequence seems likely, however. As we previously wrote here, in August 2020 in an action filed by the State Attorney General, a California Superior Court judge issued a temporary restraining order requiring the ride share companies to treat their drivers as employees in compliance with AB 5. While that decision has been appealed, it seems likely that the temporary restraining order will be dissolved now that ride share companies in California are effectively excluded from AB 5.
And at least one of the ride share companies still faces a perhaps unexpected challenge— a class action complaint alleging that it was improperly forcing drivers to support Proposition 22.
Only time will tell whether other industries or businesses will choose to use the California ballot initiative process to seek to be excluded from AB 5 or from other California laws – or whether the passage of Proposition 22 will inspire the legislature to find a better way to deal with independent contractor issues than the hastily passed AB 5.