Voters Pass Proposition 22; A Reprieve for California’s Gig Economy

58 percent of California voters have approved Proposition 22, allowing Uber, Lyft, PostMates, DoorDash, Instacart, and other gig economy companies to continue classifying their workers as independent contractors.  Effective immediately, such drivers are no longer subject to the rigid ABC test first issued in California Supreme Court’s Dynamex decision (2018) and furthered in the legislature’s Assembly Bill (AB) 5 (2019) and AB 2257 (2020)

Proposition 22 creates a new, hybrid version of independent contractor status for “application (app)-based” drivers working for “network companies” which pick up and deliver goods or people.  It guarantees 120 percent of minimum wage for “engaged” time, i.e., from pick-up to delivery, as well as per-mile compensation for vehicle expenses, and other benefits.  When a driver makes a pick up in a higher minimum wage county or city, the higher minimum applies to that trip.

A company utilizing this model may not:

• unilaterally require specific times, days, or minimum hours that the drivers must be logged into the app;
• require drivers to accept specific rideshare or delivery requests in order to maintain access to the app;
• prevent the drivers from working for other rideshare or delivery services other than when they are engaged in service for that company; or
• restrict drivers from working in any other business or occupation.

In order for the relationship to qualify, network companies and drivers must have written contracts prior to the driver accessing the company’s app and a company may only terminate a driver on grounds listed in the contract.

The new law also provides an earnings floor, and if a driver makes less than that amount for a 14-day earnings period, the company must make up the difference. In addition, companies may not take any portion of tips a driver receives from customers, must pay the tips to the driver, and may not decrease a driver’s pay because of tips.

Other rights, benefits, and policies include:

• a healthcare subsidy based on amount of driving time;
• occupational accident insurance coverage and disability coverage;
• accidental death insurance if a death results while the driver is online with the company’s app;
• an anti-discrimination policy pursuant to the Unruh Civil Rights Act (California Civil Code 51);
• a sexual harassment policy that drivers must study before driving for the company; and
• a limitation of 12 hours of driving in any 24-hour period without being logged off the app for at least six hours.

Companies must require criminal background checks for all drivers prior to accessing the company’s app, with certain convictions disqualifying the driver (e.g., felony sex or other violent crimes).  They must also provide safety training to drivers.

A company are also must have a zero-tolerance policy for workers under the influence of drugs or alcohol while driving.

As reflected in the recent “ABC” legislation above and the contrasting large majority who voted for Prop. 22, independent contractor status for app-based drivers has been and remains a hot topic.

While the balance now presented by Proposition 22 will not satisfy everyone, it permits the business survival of network companies while enhancing driver work conditions and  maintaining the convenience and relatively low cost of such transportation and delivery services.

See also,

• Back From The Brink – For Now – Uber and Lyft’s Last-Minute Reprieve From Order to Convert Drivers to Employees (August 27, 2020)
• Traffic Slamming – New Fronts on California’s War Against Uber and Lyft (August 13, 2020)
• California’s Newest Independent Contractor Law Part 2 – Revised Referral Agency Exception (September 24, 2020)
• California’s Newest Independent Contractor Law Part 1 – Revamped Business-to-Business Exceptions (September 17,2020)
• Gagging The Gigs, Plan B – California Remodels Exceptions to Its Strict Independent Contractor Test (September 11, 2020)

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
November 6, 2020