Proposition 22 Passed – What Does It Mean for the Gig Economy in California?
While some of the 2020 election is still undecided, California voters were fairly definitive in their support of Proposition 22, which will now allow app-based rideshare and delivery companies to hire drivers as independent contractors if various conditions are met.
A key part of Prop 22 provides workers with minimum compensation levels, health insurance subsidies to qualifying drivers, medical costs for on-the-job injuries and prohibits drivers from working more than 12 hours in a 24-hour period for a single company. It also requires companies to develop sexual harassment policies, conduct criminal background checks, and require safety training for drivers.
Since the advent of ride-sharing apps, the gig economy and the State of California have grappled over how workers who provide rideshare and delivery services should be classified. This disagreement started soon after these services became popular but came to a head with the passage of Assembly Bill 5 (“AB 5”) in 2019. Effective January 1, 2020, AB 5 adopted the stringent “ABC Test” for determining whether individuals should be classified as independent contractors or employees. AB 5 included a number of narrow exemptions, none of which were applicable to these drivers. This year, Governor Newsom signed Assembly Bill 2257 (AB 2257), which recasts, clarifies, and expands exemptions to AB 5. However, AB 2257, like AB 5, did not include any exemption applicable to ride-sharing companies.
With the passage of Proposition 22, app-based workers may be classified as independent contractors while also being provided benefits which typically would evidence an employee/employer relationship.
While the law is limited to app-based rideshare and delivery companies, the passage of Proposition 22 may allow for additional companies to pursue similar models. Or, potentially, other industries will seek to take their arguments for independent contractor classification to the voters. Proposition 22’s passage will also impact similar battles going on with rideshare and delivery companies in other states as well as states that planned to adopt legislation to follow California’s lead on the classification of drivers.
The legislature can only amend the new law if the changes are consistent with the Proposition’s purpose and if seven-eighths of lawmakers favor the amendment.