The Effect of Proposition 22 On The Future of California Employment Law
On January 1, 2020, Assembly Bill 5 went into effect, significantly limiting companies from using independent contractors. The bill was primarily aimed at rideshare companies, Uber and Lyft, who use tens of thousands of independent contractors across the state. Also included under the gamut of AB5 were delivery companies, such as Postmates, DoorDash, Instacart and others. This bill, because required employers to hire independent contractors as employees, and provide them with valuable benefits, such as minimum wage eligibility, sick leave and more.
Shortly after AB 5 was passed, Uber and Lyft brazenly decided that they would not comply. Instead, the companies joined forces, commencing a campaign against AB5. The result of their efforts was Proposition 22. Proposition 22 exempts transportation and delivery companies from the requirements of AB5. It also provides workers a pay rate of at least 120 percent of the minimum wage, a healthcare stipend, certain occupational-related insurance protections, and protection from workplace discrimination and harassment.
Those who were following the 2020 election will know that Prop 22 passed with 58 percent of the vote. This leaves many questions for the future of gig workers.
For many gig workers, Prop 22 seemed like a good idea. Indeed, rideshare companies Uber and Lyft promised to stop operating in California if they were forced to classify drivers as employees, claiming that doing so would not fit within their business model. Thus, some rideshare drivers understood this to mean that, if Prop 22 failed, they would be out of a job. As noted above, Prop 22 also provides some limited benefits to rideshare and delivery drivers. So, for rideshare companies and their drivers, Prop 22 seemingly works well.
However, as they say, the devil is in the details. Prop 22 only deals with rideshare and delivery drivers. This is because these industries were spearheading Prop 22, and they were only concerned about their own interests. AB5 still covers all other independent contractors.
At its core, AB5 was passed to help independent contractors. However, in reality, that may not be how it plays out. While it would be nice to think that employers would convert all independent contractors to employees, that is not realistic. Instead, most employers will bring on a few full-time employees to perform the work previously completed by independent contractors, and then cut all independent contractors. This will likely mean that freelance writers, consultants, musicians, and other independent contractors will no longer be able to find work without being hired on with a company.
Prop 22 also even further blurs the line between an employee and an independent contractor, which will likely lead to more litigation. For example, an employer’s classification of a worker as an independent contractor is not legally binding; that is a decision that, when challenged, must be made by a judge or jury. Thus, an employer may intentionally or inadvertently misclassify a worker as an independent contractor, when they are actually an employee.
Employer’s Employees and independent contractors who believe that they have not been treated fairly by an employer should reach out to a dedicated San Francisco employment lawyer for assistance.
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