California’s highest court, the California Supreme Court, just rejected a lawsuit filed to overturn California Proposition 22, which exempted ride-share and delivery companies, including Lyft, Uber, and DoorDash from the state’s AB5 or “gig economy” law. Prop. 22 is considered the costliest ballot measure in California’s history.
The lawsuit claimed the measure was unconstitutional because it limits the power of the Legislature and excludes drivers from being eligible for workers’ compensation.
Note: The term “gig economy” refers to a domain in which businesses hire workers for short-term projects, also known as “gigs.”
Prop 22 also classified ride-hailing drivers working for certain ride-share and delivery companies as “independent contractors” rather than “employees.”
The lawsuit against Prop. 22 was filed in Alameda County Superior Court after the California Supreme Court declined to hear the case. The plaintiffs argue that Prop. 22, which passed in November 2020, violates the state’s constitution.
What is California Proposition 22?
The measure shields ride-share and delivery companies from the California Assembly Bill 5 (AB5), which went into effect on Jan. 1, 2020. AB5 required ride-share and delivery companies, including Uber and Lyft, to treat their app-based drivers as employees instead of “independent contractors.”
Note: In California, independent contractors are not eligible for benefits such as unemployment insurance, paid sick leave, and workers’ compensation, among others.
More than 58% of California residents approved the state’s Proposition 22 to classify app-based ride-share and delivery drivers as “independent contractors.”
Under the new measure, a driver is classified as an employee when the company:
- Sets the driver’s hours
- Requires the driver to accept specific requests
- Restricts working for other employees or companies
However, the proposition allows the qualifying app-based ride-share and delivery companies to provide partial benefits to their drivers, including a minimum base pay that is higher than the federal minimum wage. Prop. 22 also requires companies to protect ride-hail drivers from discrimination.
What do critics of California Proposition 22 say?
Essentially, Prop. 22 allows companies like Uber and Lyft to save on employee expenses because they do not need to pay for unemployment insurance, health care, workers’ compensation, and paid sick days or family leave.
As mentioned earlier, Prop. 22 exempts app-based ride-share and delivery companies from AB5, which codified a strict test to classify app-based ride-hail and delivery drivers as employees who are entitled to basic rights, benefits, and labor protections.
Critics of Prop. 22 say ride-share and delivery drivers in California would still be exploited by gig companies because workers have no access to protections such as:
- Workers’ compensation
- Family leave
- Sick leave
- Unemployment insurance
- Ability to unionize
One of the concessions granted by Prop. 22 was a minimum earning guarantee for ride-share or delivery drivers when they are fulfilling ride and delivery requests. However, drivers are not compensated for the time spent waiting for ride requests.
After the success of Proposition 22 in California, similar measures are expected to pass in other states where classification of “gig economy” workers remains in flux.
What do you think? Propositions in CA are passed by the will of the people. Should they be overturned through lawsuits?