California and Employee Misclassification
The modern story of worker misclassification began in 1989. The California State Supreme court is deciding on whether farmhands engaged in a unique sharefarmer agreement were “independent contractors” exempt from the guarantees of employment or employees. In the decision of “S.G. Borello & Sons, Inc. v. Department of Industrial Relations” the court replaced the common law “control of work” test with the new minted fleshed out Borello test to guide state courts in misclassification cases. Under this test all courts and businesses must start with the premise that each worker is an employee. From there they would determine whether the work was distinct enough from the employer to be an independent contractor. The most critical factor was if the “person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” Courts could also consider 9 additional factors:
- right to discharge at will, without cause
- whether the one performing the services is engaged in a distinct occupation or business
- the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision
- the skill required in the particular occupation
- whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work
- the length of time for which the services are to be performed
- the method of payment, whether by the time or by the job
- whether or not the work is part of the regular business of the principal
- whether or not the parties believe they are creating a relationship of employer-employee.
For the next 28 years the Borello test was used to distinguish employees from independent contractors in misclassification cases. But the Borello test is complex, for business owners it was not particularly definitive to know when an individual was qualified to be a contractor. This wide band of gray continued the mass misclassification the court intended to prevent.
With this broad band of gray, in 2004 Dynamex set out to reclassify their delivery drivers as independent contractors. They continued controlling the wage of the workers, routes and continued to set the price for use of their service. But responsibility for wear and tear of vehicles, insurance, gas, paying taxes, etc. was all shifted to the drivers. In 2005, a suit was initiated against them by a new driver they contracted with. After 13 years, in 2018, the misclassification case had progressed to the California Supreme Court. At this point the court recognized the faults of the complex Borello test and in a landmark unanimous decision adopted the ABC Test for assessing worker classification. The ABC Test, or variants of the test, are used today for one purpose or another in 28 states. The test originated from 2009 Wisconsin Unemployment Insurance Law(as far I can research). Like the Borello test, the ABC test by default presumed that workers are employees. However, if the employer to worker relationship clearly met all conditions of the test, it would endure the challenge as an independent contractor relationship.
- The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
- The person performs work that is outside the usual course of the hiring entity’s business.
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Although Dynamex long predated the gig economy the result of the Dynamex Operations v Superior Court case clearly was a shot across the bow of how the gig economy(Uber, Lyft, Doordash, Instacart, etc.) was operating as a business model.
AB 5 – Worker status: employees and independent contractors enters the ring
Reacting to the court’s decision and influx of issues in the gig economy by the end of 2018 Lorena Gonzalez had initiated the Assembly Bill 5 to codify the court’s decision into law. The bill had a rough path to becoming law undergoing 4 to 5 major rewrites, passing the Senate on 9/10/2018(29-11 – party line vote – DEMs) and the Assembly on 9/11/2018(60-19 – 2 Republican Yea and one democrat Nay). Then it became law signed by the Governor Newsom on 9/18/2019 to much media excitement stirring the pot between the state and gig companies. It was passed bi-partisan and was approved only after months of consideration by the labor and appropriation committees of both the Assembly and Senate.
AB 5 codified the California’s Supreme Court ABC test for California as the primary formula for worker classification. AB 5 is a mandate on the companies, not the workers. But under the scrutiny of legislators AB 5 also seeked to enable the courts to rely on the Borello test as the default for particular industries and professions. This was presumably to maintain the existing precedents of the courts and prevent the forced re-evaluation of 25+ years of precedent. AB 5 did not provide for “exemptions” entitling any worker to the status of independent contractor. Each working relationship would either be validated by the ABC test or the Borello test.
- Borello test should be backup for any assessment that the courts could not ascertain with the ABC Test.
- State licensed individuals – physicians, lawyers, architects, etc… should utilized the Borello test.
- For professional services that historically have had a level of autonomy such as fine artists, photographers, marketers, travel agents can skip to the Borello test if they meet certain criteria that displays their independence:
- regularly does work for other clients
- own a business license
- makes independent judgments on performance
- Licensed esthetician, electrologist, manicurists(until 2022), barber or cosmetologist can also be assumed to use the Borello test following the conditions:
- Own independent business license and use 1099 for federal taxes
- Manage their own clientele, book and hours
- Responsible for their own rates and are directly paid by customer
AB 5 avoided loopholes by proclaiming that business-to-business, subcontractors, and referral agencies relationships should be handled by the Borello test. In order to qualify they must fit specific criteria that exemplifies their independence and self-reliance. AB 5 then amends the labor code to include in the definition of an employee as any individual that was an employee according to the ABC test as of July 2020, and not retroactively. Any individual classified as an employee prior to 2019 can not be reclassified to a contractor.
Lastly, AB 5 invites the state Attorney General along with city attorneys of cities with a population greater than 750,000 (Los Angeles, San Francisco, San Jose and San Diego) the privilege to take action on employment misclassification.
The signing of AB 5 represented a significant shift in California’s employment paradigm. With the easy ABC Test functioning for the vast share of individual-employer relationships, employers no longer were guaranteed ignorance for misclassification. The intrusion of a single tenant of the ABC test is enough to establish a relationship is not a contracting relationship. A UC Berkeley study estimated that 64% of workers that were classified as independent contractors for their primary income would be impacted by AB 5, a fraction of that would be gig workers. The gig economy was visibly a primary consideration of the legislation, they were going to be the most vocally rebellious, but they were not the sole target.
AB 5 affected many companies and industries but tech as the youngest and most able to take advantage of classifying workers as independent contractors required the greatest shift. The video game industry heavily depended on contracts with workers, tech startups contracted software engineers to avoid HR work and even the major firms like Google used contractors to insinuate disposability. Newspapers(recently got a year extension) and the sports industry have had to address how AB 5 affected their employment processes as well.
AB 5 did not mandate inflexible schedules, guaranteed hours, employment hiring practices, paid-time off, or any other benefits which continue to be defined by each company’s policies. Employees do inherit all the protections from 100+ years of labor laws – minimum wage, protection from discrimination in all aspects of employment, unemployment insurance, disability, indemnification from liability, layoff warning(WARN), the ability to collectively bargin(unions), expense reimbursement, workers compensation, W-2s and access to file complaints with the state board of labor. Full-time employees benefit from overtime, health-care subsidy, sick leave and paid family leave.
Though AB 5 involved a rigorous process, it would be clear arrogance to claim it was flawless. Most notably it was a critical oversight of AB 5 not to provide for the entertainment industry to use the Borello test. While contracting musicians could pass (A) of the ABC Test, it would be impossible to argue that performers contracted to perform for a short period of time were not part of the purpose of a performance hall or bar. This oversight could have been a severe detriment to the state had the entertainment industry not been crushed by precautions taken for COVID-19 first. Assembly Bill 2257(AB 2257) updated sections of AB 5 and clearly delegated performers to using the Borello test. As time goes on surely AB 5 will require more fine-tuning from elected leaders.
Gig Companies Response and Proposition 22
Even before AB 5 Uber had just settled a 6-year(2013-2019) misclassification class action suit that attempted to get the company to recognize drivers as employees. It resulted in a payout of $20 million and restrictions on how they could deactivate/terminate drivers. The ultimate question of whether drivers were employees or independent contractors was left unanswered. After finally tackling that case, just a few months later AB 5’s passage marked the next challenge to gig economy corporations(gig companies). Uber, Lyft, Doordash, Instacart, and Postmates were the most visible players impacted by AB 5. Their business model is contingent on the classification of the bulk of their workforce as independent contractors. The working relationship between drivers and gig companies violated one, if not two, tenants under the ABC.
- Gig companies control over what the workers do and earn. Gig companies provide them with maps, punish for quality of work(ratings from customers), control the cost of the service, delegate the customers to the workers and the gig worker is not responsible for decisions regarding the customer – to give a discount, raise the price for a troublesome customer, etc., they are not the gig worker’s customer. On top of that drivers do not have compensation negotiation power with the companies.
- Since the beginning gig companies have argued they are software companies that connect riders and drivers. But no judge could ignore that these gig companies do not generate revenue from selling software(like a PC game or photoshop) or use of the software(Google or Facebook).
They generate income from the services that these workers provide. The workers cannot be paid by the customers or even per trip, they are compensated through the company. This is consistent with any other typical employee-employer arrangement. An employee performs work(selling a product, building software, working the cashier, working on the assembly line) on behalf of a company who compensates them and generates revenue from that labor.
Gig companies promptly began engaging options – from creating a ballot proposition, filing suit against the state or remodeling the business to satisfy the ABC test. Uber and Postmates made a federal suit on December 30, 2019, against California to claim that AB 5 was unconstitutional. The Lydia Olson v State of California case contended that AB 5 was a violation of their 5th and 14th amendments rights. February 10th the federal court declined to prevent enforcement of AB 5 and the appeal appears to have been quietly dismissed(I could not tell or find articles confirming). In September 2020 the federal court found AB 5 constitutional but allowed for Uber/Postmates(bought by Uber in July 2020) to modify the complaint.
With the federal case clearly going in the state’s direction in May, the California Attorney General and City attorneys for San Francisco, Los Angeles and San Diego decided it was time to enforce AB 5. They filed suit against Uber and Lyft for misclassification of employees – California v Uber & Lyft. By August the California Superior Court of San Francisco made a preliminary injunction(prior to the case being settled) to require Uber/Lyft to classify their drivers as employees. This victory boded well for the state’s case, but Uber/Lyft swiftly shifted headlines with plans to shut out drivers in California in response. To quell concerns, the judge issued an indefinite stay on the injunction(freeze) contingent on all parties agreeing to expedite the case and receiving a legal affidavit from the CEOs from both companies that in the event of Proposition 22’s failure and if the injunction is upheld they’ll be ready to implement a plan to reclassify drivers. As of today the case California v Uber and Lyft stands in limbo, biding time until the result of Prop 22 can be determined.
But gig companies’ ideal goal is passing the initiative ballot measure. On Oct 29th, 2019 Uber, Lyft and Doordash announced they seeded an initiative measure campaign with $90 million($30 million each). December 9th, 2019 they submitted their proposed measure with the State Attorney General and began circulating for voter signatures the 2nd week of January. By the end of that month, a forth of the signatures required had been collected. On May 22, 2020(likely slowed down by COVID-19 SIP orders), having collected 623k signatures their initiative measure was qualified as State Proposition 22 of the November 2020 ballot. Postmates(operating distinct from Uber) and Instacart also to benefit from Proposition 22 in September began donating in maintaining drivers as independent contractors
Enrolled as “Proposition 22 – Protect App-Based Driver and Services Act” this proposition defines a new class of “app-based drivers” and recognizes them as independent contractors for all purposes of labor law.
Four relevant definitions are:
- Engaged time – period of time from when an app-based driver accepts a request to the completion of that request.
- Delivery network company(DNC) – NC that facilitates delivery services on an on-demand basis
- Transportation Network Company(TNC) – NC that provides prearranged transportation services for compensation using an app to connect passengers with drivers.
- NC(Network Company) – a DNC or TNC
- Average ACA contribution – 82% of the dollar amount of average monthly covered california premium
Prop 22 imposes regulations on “Network companies” such as Uber, Lyft and Doordash to facilitate this relationship. To designate a relationship with a network company and driver as an app-based driver the network company:
- Cannot unilaterally decide specific dates, time of days or require a minimum number of hours
- Cannot require a driver to accept any particular request
- Cannot restrict driver’s access to other apps, unless already serving a request
- Cannot restrict a driver work with another occupation or business
Prop 22 includes a set of requirements on network companies:
- must enter into a written agreement with each driver
- cannot terminate the contract unless its a reason stated in the contract and must offer an appeals process.
- must provide exact sum of tip money provided for a driver, cannot take credit card fees or use tip money to offset other compensation
- NCs must assess a minimum floor for compensation for each trip. 1.2 times minimum wage of the location of pick up of the rider/item x total engaged time base.
- must provide 30¢ per mile during engaged time(starting in 2021 and adjusted for inflation)
- This minimum floor only applies to the net earnings for an earnings period and not per trip
- Must provide app-based drivers benefits
- Based on number of hours of engaged time per quarter drivers are eligible to receive healthcare subsidy, which can be received by more than one network company at a time
- Must provide occupational accidental insurance up to $1 million, disability of 66% of average weekly earnings, accidental death insurance if death occurs during engaged time
Because law does not offers independent contractors protection from discrimination Proposition 22 contains Article 5 which obliges limited protections for protected classes and to recognize the gig economies’ role in protecting public safety
- Network companies cannot refuse to contract with, terminate or deactivate from app based on race, color, ancestry, national origin, religion, creed, age, physical or mental disability, sex, gender, sexual orientation, gender identity or expression, medical condition, genetic information, marital status, or military or veteran status.
- Each network company must develop a sexual harassment policy, that enables a process for filing complaints from any party(driver or rider) and attempts to maintain anonymity. They must allow online complaints and indicate they’ll conduct a fair, timely and thorough investigation.
- Criminal background checks must be completed prior to permitting an app-based driver to accept requests. Consenting once to background checks is consenting indefinitely.
- Prohibits NC from permitting drivers convicted of specific crimes of being active on the app, and must suspend drivers found to be arrest of such crime until they the case is completed
- NCs can add more restrictions and may receive external reports about employees or drivers(tweets).
- Must provide a “zero tolerance policy” that mandates the suspension of access to the network when a driver is reasonably suspected to be under the influence of drugs or alcohol while providing service.
- Drivers may not work for 12 hours in any 24 hours period unless they take a 6 hour break.
Proposition 22 goes further to criminalize the act of impersonating an app-based driver subject to imprisonment for up to 6 months or/and a fine up to $10,000. Any person impersonating a driver in tandem with: kidnapping of child, kidnapping, assualt for felony, sexual assault(NSFW – section 261, 264.1, 286, 287, 288, 289), will receive an additional term of 5 years, a person that causes death against a non-accomplice will receive 10 years.
To provide for a homogeneous standard across California Proposition 22 negates local control and requires the state be the sole regulatory factor for driver compensation(except for the minimum wage), benefits, scheduling, leave, healthcare subsidies, driver licensing, insurance requirements and drivers protections with regards to termination of the contract. Proposition 22 does not prevent a locality from managing their own criminal local ordinances.
Proposition 22 is proposed as a statute(not constitutional amendment) as such it is able to grant the legislature the privilege to update it without a statewide vote[Article II of State Constitution]. Proposition 22 requires that any statutes that would impact app-based drivers outside of increasing criminal penalties of Prop 22 meet certain requirements:
- 7/8th (87.5%) of the both chambers of the legislature to amend(70/80 of assembly and 35/40 of senate).
- The finalized bill would need to be printed and provided to every member of the legislature and published on the internet 12 days in advance.
- The legislature would only be entitled to enact legislation that furthers the purpose of Proposition 12 and the definition of who qualifies as an app-based driver can not be modified.
- The same requirements are held for the legislature to pursue any legislation that enables an organization or entity to represent the interests of drivers.
Finally Proposition 22 includes a severability clause that if a portion of it is found to be inconsistent with the California State Constitution or US Constitution the rest will remain in effect. If the California Attorney General refuses to defend Prop 22 in any case, the Attorney General will appoint independent counsel to defend the act on behalf of the state. The state general fund will be required to cover the costs of retaining independent counsel.
The gig economy was designed around an independent contractor model. Under the Borello test there was a wide band of gray to work with. While such things as defining hours, shifts or location were clearly off the table in avoiding employee classification. The existing construct requires that drivers carry the cost to use their vehicles, the risk of rider demand and they have no authority for negotiation of their compensation or benefits. Under the ABC test of AB 5 it becomes unavoidable to eventually to classify gig workers as employees.
The employment of gig workers also entails many other commitments and liabilities for gig companies. Such as maintaining unemployment insurance, managing W-2s and withholding for FICA(Social security and medicare) would be considerable costs for them. Lyft and Uber estimated $392 million each in employment costs, if they were to maintain a presence in California with gig worker employees. Potentially most damaging to their model would be the negotiating power of unions. Regardless of how the state’s enforcement case goes and the gig companies obligation to have a plan should Proposition 22 fail, they have serious decisions to make in regards to whether to stay or leave the state.
In a timeline of Prop 22’s failure, choosing to stay would send a message to other states(some of which are also reconsidering worker classification) that California’s action on classification of employees was not a dealbreaker. Gig economy companies would be left with two routes in California. Both could result in higher prices for consumer and would setback plans for profitability:
- Gig companies could pursue working through the gray until they got back to independent contractors. This would mean doing a 90° on their model and making their software the actual product/service. If they were to follow the business model of their competitors, their software would become a subscription service for drivers and/or riders.
Gig workers would gain more independence than before as they would continue to be able to freely control their scheduling, hours, and pricing but they would also be able to treat the customer as their customer, not the gig company’s. If drivers want to provide a discount or surcharge, get paid in cash, develop customer loyalty, make coupons, or other loyalty rewards that’s up to the self-employed businessperson. The company would have no rights to incentivize or discourage them. Their role would be to simply introduce drivers to customers and develop features to assist drivers such as processing fares or offering insurance, if the driver elects to do so.
As gig companies would no longer serve as a brand to customers, they would (at least initially) be capable of forsaking all responsibility/liability for drivers’ behavior. They would not have an obligation to background check, insure drivers, provide safety training or handle discrimination complaints. An aggrieved customer could not burden the companies for the misdeeds of the gig worker. And the company would be unable to provide refunds and would have less motivation retaliate against the gig worker. The customer would need to work out conflicts with the business owner – the driver.
- Gig companies could accept gig workers as employees. Either they classify them as employees outright, or they might establish subsidiaries to employ them. The most likely option is they would license their software and network to middle-man franchise companies to employ drivers.
The flexibility and hiring of the employees would be up to the companies that decide to take them on. Laws do not require employees to work certain hours(though there are restrictions on how long they may work in a given time frame) the company policies would decide that. If the employers want to maintain flexible work schedule policies, they could easily use software to operate as such. To avoid providing full-time benefits employers could cap driver hours to 30. But employees would be subject to minimum wage per hour for anytime they are working. Employers might actually prefer that drivers unionize. Unions can negotiate for lower than minimum wage in California and this would likely be organized around acknowledging a commission-based fare agreement with gig companies. However, there would be no escaping the tax costs associated with employees – FICA, SECA, unemployment insurance, etc. Costs that were passed on to the gig worker in their historic arrangement.
Whereas before gig companies would manipulate drivers behavior with surge pricing and other rewards, as employers they would be entitled to request drivers signup or work particular shifts. As employers they could assign drivers requests, if necessary, and drivers that refuse to respond would be subject to retaliation or termination. Employees could theoretically serve requests from multiple apps, but it is inconceivable any company would allow them to double dip during waiting time. It’s also very possible that a collective bargaining group(unions) will pop up immediately to settle employee conflicts with the employer.
After consideration gig companies may also abandon California, which is as much risk for them as it is to the welfare of the state. There are benefits from ride-hail and delivery services, and California has grown a reliance on them in the past decade. In most of California it is burdensome to get around without a car. Even in SF, where historically driving is not the primary choice for the majority of trips, it can take many times longer to get to a destination via alternative transportation mode(transit, scooter, biking, walking) than by car. Uncertainly drunk driving incidents have gone down in California as a result of services providing rapid food delivery or a ride to a customer’s destination. Gig companies have come to be relied on by the younger generations. Economically they are a major workforce in the state upwards of 200k workers and millions of dollars in payouts each month. The positive impact is no better showcased than how food delivery work expanded and served california residents during COVID-19. This may not be so easily replaced if gig companies follow through with their implicit ultimatum and decide to exit California.
Gig companies also cause negative impacts on the state. The rise of employment involving more driving results in increases in traffic congestion, increased damage to roads and traffic fatalities circumventing cities’ vision zero efforts. It undercuts endeavors to move away from automobile reliance and reduce carbon emissions even more so than self-owning cars. Uber and Lyft’s competition is public transit, they are responsible for at least a sizable portion of transit ridership loss, and aim to reduce support and replace transit systems. It’s always possible, if gig companies left the state upon losing their court cases, they could almost definitely come back in 2022 with a new initiative measure against AB 5. And while gig workers may be succeeding now, its indisputable that gig companies’ objective is to replace humans with automation. 200k lost jobs today could be 400k in 2030 and would leave a gaping hole in our economy.
But the risk to the gig companies in shutting down operations in their rich home state of California is they vacate it for competitors to thrive in. In Austin, TX, when Uber and Lyft refused to bow down to Austin’s voter-approved background check ordinance competitors sprouted. This is not to say that those new apps were suddenly able to fill their shoes in Austin. And only a year after the major companies left Texas’ legislature stepped in to override Austin’s voters. California has access to several much lesser known start-ups willing to fill the void should the companies stick with this ultimatum. Dumpling and rideconnect do exactly option (A) gig workers subscribe and run their own independent businesses. Alto, not operating in California but aware of the situation, portrays the other direction to hire drivers, who get paid hourly, along with the benefits of employment. Uber and Lyft for the most part enjoy a duopoly, competitors developing in the most valuable market in the country, unimpeded by them is as much a threat as worker employment is.
Passage of Proposition 22 would be uneventful from the public’s perspective, things would more or less stay the same. AB 5 would continue to classify every other industry except app-based drivers. Presumably the California vs Uber and Lyft case would be dismissed in light of the statutory change. Because of the amendment clause of Proposition 22 the legislature would need to stay clear of anything to do with Proposition 22. They would risk their work being voided by its strict transparency and voting requirements. However the gig companies would have showcased that corporate-crafted law can be bought though initiative measures, with overwhelming advertising and misleading values/wording rhetoric. This was already a fear of the legislature and a problem prior to 2020. With the unfortunate passage of the AMR-backed initiative Prop 11 and the state legislature already pre-conceding to the soda industry to ban local soda-taxes, passage of Prop 22 would certainly be an open invitation for corporations to be brazen in peeling back disadvantageous California regulation using the voters.
My Views [Abandon all pretense of objectivity]
As a transit advocate Proposition 22 is an easy no. From my perspective TNCs reflect a return back to reliance on automobiles and bear responsibility for loss in ridership of transit and increased danger to active transportation. They represent increased congestion, more dangerous streets and more carbon emission. It is anti-competitive for unionized employed transit agencies to compete against companies that have practically no obligations to their workers or riders. Proposition 22 which maintains the status quo of undermining public services and relying on corporations reliant on wealthy investors is corporate appeasement. While I’ll admit apathy to TNC existence, if they are going to exist the gig workers should not be in some middle ground between an employee and independent contractor. If gig workers only serve as an interim placeholder until they can be replaced by automated vehicles we should maximize the benefits they get from companies.
Gig companies have never shown profitability, they lose billions each year(Uber $8.5 Billion alone in 2019), sustained by a constant infusion of investment. Unless they make it the 10-20 years it will take for automated car fleets to replace drivers, eventually they may go out of business. They will ghost everyone who depended on them, workers and riders, abandoning them without alternative options. Their lack of commitment to stay in California regardless of the result of Proposition 22 highlights their primary value in California is exploiting misclassification and denying workers real employee protections. If gig companies continue to operate in California, they need to take the good with the bad of our government and laws. Gig companies were pleased when the California Public Utilities Commission opted to preempt local regulations for background checks. They have no higher ground from which to stand when they don’t get what they want.
Proposition 22 portrays an appalling epitome of corporate-crafted legislation. It is not a repeal or referendum of AB 5. Prop 22 creates a specific exemption for “app-based drivers” to the benefit of gig companies and excludes the elected legislature from any role in that relationship. At face value gig companies certainly have made concessions and self-imposed regulations:
- to delegate a level of independence to drivers
- to background check
- harrasment and safety training and anti-discrimination requirements in contracting
- healthcare subsidy
- worker and disability insurance
- a form of minimum compensation and 30 cents per mile
I can’t argue that Proposition 22 is all bad, the concessions are something, even though gig companies could have provided for this of their own volition. I feel this exemplifies their interest in selling the measure, not in prioritizing the workers. My complaints with the proposition can be found in the loopholes and specific wording:
- Proposition 22 explicitly requires gig companies to not discriminate in contracting with, terminating or deactivating from the app. But this isn’t a problem for these companies, they can discriminate against them as workers. I can’t deny I don’t know of any particular interest they would have in discrimination(uber has even gone so far as to reshape its image as the anti-racist company). I can imagine a machine learning algorithm to recognize for example: that in conservative locations that members of LGBT community or certain ethnicities receive more complaints and then begin to treat those workers unequally.
As an employee these gig workers would have guaranteed protections from being discriminated against by the state and federal government both in work and in employment hiring. As a contractor nothing prevents gig companies from providing an unequal playing field for individuals based on their traits, Prop 22 does not guarantee that protection.
- California labor law considers political affiliation and activities a protected class. Proposition 22 omits that from its long list of app-based driver protected classes.[This might be a good thing though, from my perspective]
- Gig companies can not “unilaterally” prescribe the dates or times of day that a driver may work. Gig companies’ model lies within the confines of utilizing software and other incentives to manipulate driver behavior, not “unilaterally” deciding when gig workers work. “Independence” is less valuable if a business can define when and where it makes sense to work.
- Prop 22 prohibits a minimum number of hours in which a user can be logged on to the system but avoids prohibiting the companies from setting a maximum either logged-in time or engaged time. Say if they wanted to prohibit drivers from serving the 25 hours required to receive the maximum health care subsidy
- The minimum earning floor is determined as 1.2 times the minimum wage of the place of pick-up. Even considering it’s only for the “engaged time” this appears to be fair(if you’re unconcerned about unengaged-time/waiting time). It is assumed gig workers are making the minimum wage at least for every minute of fulfilling the request. But Prop 22 further states that this is assessed only for the floor of the whole earning period, not per trip. Meaning that other trips can offset trips that didn’t make the minimum wage.
- 30￠per mile(adjusted for inflation after 2021) appears to be reasonable for reimbursement of car use but the standard rate per mile estimated by the IRS is 57 cents. Gig workers still have to pay for gas, wear and tear, oil and cleaning of their vehicles, 30 cents doesn’t not go far enough.
- Barriers to entry and corrupt influence on government are frequent complaints of the Taxi industry. How taxis used local governments to monopolize medallions and required burdensome fees to operate in cities. But Proposition 22’s requirements of insurance, disability without basis of size appears to be anti-competitive, a start-up entering California would be unlikely to be able to meet those expensive expectations.
- Prop 22 creates criminal law, without any input from the elected officials and is packaged with everything else. Corporations should NOT be legislating criminal offenses for harm to their service’s trust. It is preposterous that gig companies have the audacity to require the state to imprison criminals that wrong them. I agree impersonating a gig worker should be a crime but the corporations impacted should occupy no role in determining the potential sentences or definition of that. False impersonation is already illegal in the State of California, gig companies at present receive some protection from impersonation.
More so Prop 22 requires mandatory extended sentences for certain crimes which void any discretion of a judge. While Brock Turner serves as an example of why judicial discretion can go wrong. We already have sentences for the act of these crimes, that they posed as a driver should not guarantee them another 5 or 10 years. It would be injustice for someone to be convicted of these corporate-defined crimes.
- Prop 22 prohibits local control in regards to cities or counties that want to require driver accommodations, they wouldn’t be able to enforce such requirements on the companies or drivers. They couldn’t require special driver licensing or insurance (presumably only San Francisco or Los Angeles would ever actually attempt to do so).
- Upon passage Proposition 22 would already inherit protections from being undermined by the legislature. The state can not change the text of the proposition without the electorate’s consent. Prop 22 ties an extremely tight second knot around the hands of the legislature. With a requirement of 7/8th for each chamber, the legislature could effectively never pass any legislation directly impacting app-based drivers including traffic control(Designating pick up spots or controlling access to airports, etc.), fare standardizing, licensing or other requirements.
The level of procedure goes beyond simple transparency which California already approved prior with Proposition 54, Proposition 22 expands that such legislation would need to comply with preposterous requirements of providing printed copies of the final copy to each individual member of the legislature and be online 12 days prior for it to satisfy the amendment clause. The intent being that if one member is on vacation, sick or didn’t personally receive the printed form, would invalidate such legislation, if challenged.
It is admirable that the proposition allows for amendments to the sections of the proposition but it would be near impossible for the legislature to achieve that standard.
- Having learned through the Proposition 8 decision in the US Supreme Court that the government does not inherently have an obligation to defend propositions that it doesn’t agree with, Proposition 22 obligated the state general fund to pay for an independent counsel to defend their proposition should it be questioned in law. I believe that if this law was challenged the taxpayers should not be held to defend it, the gig companies should be willing to put up the money for it.
Outside of these issues with Prop 22, gig companies would continue to avoid funding unemployment insurance leaving the program unfunded. This wasn’t a serious problem until COVID-19 hit and the federal government through the CARES act needed to support these workers, corporate socialism. Uber and Lyft are valued at upwards of $60 Billion, they clearly have the capability to provide the millions that the unemployment fund needed. Proposition 22 does not commit any responsibility on the companies to contribute to this vital social safety net.
I have one issue with AB 5, that Prop 22 solves – unengaged-time/waiting – time that a driver is on the app but has not engaged a request. To me this is comparable to being on-call, this is time that the driver is not doing other activities – drinking or sleeping. They must be attentive to their phone, even though they have the right of refusal regarding requests. As companies may adopt scheduling and shift assignments this appears to be the issue of “independence” that many app-based drivers worry will be stripped of. Drivers deserve minimum wage for being on-call/unengaged and it is not their fault that requests are not sufficient for their time. There is less a concern with a driver simply leaving their app turned on to abuse the system and making minimum wage. Which as a programmer I believe can be solved by the same methods that netflix uses to make sure “are you still watching” and gig companies could easily cap the number of workers to match the demand within a period of time.
My disappointment is the legislature did not offer a solution for double-dipping, working with multiple apps. Drivers should have the opportunity to answer calls between Lyft, Uber or any other service as long as the requests don’t overlap. In my understanding, gig companies would be in violation of antitrust to organize splitting the minimum wage for active gig workers. So this falls on the state to negotiate a solution for this predicament. Under Proposition 22 gig workers would clearly be making less than minimum wage when gig companies do not pay for the waiting time. However not being able to sign-on to multiple apps eliminates opportunities for gig workers to generate commission revenue. Uber and Lyft will never agree to both be paying minimum wage at the same time to workers on standby for a request. It’s a dismal failure of the state government to not have a response for ensuring gig workers’ flexibility.
But the issues of unengaged time does not warrant the baggage of Proposition 22. Gig companies must change to the benefit of Californian workers whether that is to grant them more independence or classify them as employees. Lyft and Uber drivers have long decried policies from their employer. In 2019 gig workers held a worldwide strike and Uber settled a misclassification suit from drivers resulting in a payout of $20 million. Gig companies have altered fare formula without worker notification and have been caught stealing or capping tips. The legislature may not have considered all the ramifications shifting gig workers to employment but gig companies also have a history of not inviting drivers to the table.
Lorena Gonzalez, author of AB 5, stated that her goal was empowering gig workers to unionize, to have the privilege. Encourage them to organize and pressure gig companies to invite workers to the table. She did not do it out of some vendetta against gig companies or gig workers. She crafted and fought for the legislation at the request of her constituents. Her goal is to give gig workers the right to be either truly independent or in dialogue with their employer. Unions, while valuable for the worker offers a threat to these transportation companies that rely on workers not having a united say. Capitalists(wealthy investors) invest billions in the gig companies not because they want to chauffeur millennials or to empower flexible schedule workers, they want to generate wealth. Gig companies function in a gray area of labor law where they could off-load much of the cost of operations on to the workers and meanwhile prevent them from having any negotiating over their compensation or benefits.
While we should recognize that essentially all work is a form of exploitation. The system that the gig economy operates undermines the very protections the United States erected to facilitate the american dream. Consent is not an argument for enabling unjust exploitation. Some slaves wanted to remain slaves, some children that wanted to work as 10 year olds and some miners that wanted to mine without regard to their health. Society and our elected representatives have a role in determining the minimum standards we want workers to retain, regardless of whether they’re willing to do it for less.
AB 5 is what our elected legislators, through their process, were satisfied voting on and passing. Proposition 22 is what unelected corporations leaders were satisfied with. I admit that failure of the proposition may incur a burden on California either in steeper prices or reduction of service. I admit the legislature has a responsibility to better serve this community and maximize their opportunities for prosperity. However, I can’t believe it would be better to codify a third lower class of workers, that neither has true independence or actual benefits of employment. I will vote no because gig companies have received 10 years of not making that choice. They have continuously failed to uplift their gig workers and if they eliminate service I believe California will adopt better services. Lyft and Uber, worldwide dominating TNCs, didn’t just start anywhere, they started in California, home of US innovation(… and home to 40+ notable venture firms and 160 Billionaires).