Uber and Lyft's Major Win -Proposition 22
On November 3, 2020, California voters resoundingly passed Proposition 22, delivering Uber, Lyft, and other app based driver and delivery companies a big victory, and labor unions a setback.
Prior to Prop 22, AB5 expanded the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court. Specifically, AB5 applied Dynamex’s “ABC test” to both California Wage Orders and the California Labor Code, creating a presumption that workers in California were employees, not independent contractors, unless an employer could satisfy the three-part ABC test. Under the ABC test, workers are presumed to be employees unless the employer can show: (A) the company does not control or direct what the worker does, either by contract or in actual practice; (B) the worker performs tasks outside of the hiring entity’s usual course of business; and (C) the worker is engaged in an independently established trade, occupation, or business.
Prop 22 exempts rideshare and delivery companies from Dynamex’s ABC test. However, the new law comes with certain requirements, including:
Earnings Guarantee: Rideshare and delivery companies must pay 120% of the local minimum wage, plus 30 cents per mile (adjusted for inflation) for “engaged” driving time (i.e., time spent actively driving, not waiting).
Healthcare Subsidies: For drivers working 15-25 hours per week, employers must pay greater than or equal to 50% of the average employer contribution toward a Covered California Plan. For drivers working over 25 hours per week, employers must pay greater than or equal to 100% of the average employer contribution toward a Covered California Plan.
Loss and Liability Insurance: Companies must carry, provide, or make available occupational accident insurance to cover medical expenses (up to at least $1,000,000) and lost income (equal to 66% of the driver’s average weekly earnings) resulting from injuries suffered when the driver is on the company’s platform.
Anti–Discrimination and Public Safety: Prop 22 prohibits workplace discrimination, and requires companies to (1) develop sexual harassment policies; (2) conduct criminal background checks; and (3) mandate safety training for drivers.
Prop 22 can only be amended if proposed changes are consistent with the new law’s purpose, and supported by seven-eighths of lawmakers favoring the amendment.
Prop 22’s passage will likely elicit other industries to campaign for independent contractor classification. Some industries have already done so. AB 2257, which passed last September, exempted musicians, fine artists, freelance writers, photographers, and translators from being classified as employees, deeming them instead independent contractors. California can expect other industries to similarly pursue independent contractor status to avoid high costs associated with hiring employees.
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