A New Model of Worker Classification Emerges from California’s Proposition 22 as the Direction of the Gig Economy is Fought Over Intensely

On election day, ballot measure Proposition 22, backed by App-based driver and delivery companies Ubder, Lyft, DoorDash, Instacart and Postmates passed in California, creating an exemption from labor legislation passed last year that required them to classify drivers as employees as opposed to independent contractors.

At issue is the future direction of a large portion of the economy – specifically, the ‘gig economy,’ and the economic security of workers in the face of the push and pull between two historical employment classifications and an emerging third model.

Last year’s AB 5 legislation in California caused more individuals to fall under the first classification – that of employee – with protections such as hourly minimum wages, overtime and unemployment and worker’s compensation benefits. Employees are also able to seek protections under federal and state civil and human rights laws. AB 5 also placed an emphasis on low wage workers in fields such as construction, home health care and janitorial services.

However, a trend among tech companies including the five that backed Proposition 22, has been to make heavy use of independent contractors, who do not have the above protections as they are considered independent of the companies for whom they provided services to. There has also been much focus on whether such classifications on the part of the companies have been correctly made, and whether they were seeking to provide less protections and pay while essentially treating workers as employees.

In an attempt to provide clarity as to the classification process, California’s Supreme Court set forth a 3 part test in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, essentially looking to see whether an employee’s work was free from the hiring entity’s control, whether the work was outside of the the hiring entity’s usual course of business and whether a worker has an independent business engaged in the type of work being performed. AB 5, drafted by California Assemblywoman Lorena Gonzalez was a codification of Dynamex.

Now with the passage of Proposition 22, a third model has emerged under which App-based drivers and couriers who use their own vehicles to provide on demand services are classified as independent contractors without the traditional protections of employees, but are provided such things as a guaranteed minimum pay rate while assigned a task, a review process for terminations and health stipends if they work enough hours.

Uber has been putting thought into such a third model as can be seen in what they refer to as priorities to ‘enhance the quality and security of independent work,’ and Door Dash CEO Tony Xu called the passage of Proposition 22, a ‘new framework,’ with ‘historic new protections’ in a company blog post.

However, Assemblywoman Gonzalez tweeted in response to Proposition 22’s passage that, “Uber & Lyft didn’t spend $200m talking about unions, they spent it lying about worker protections,” and vowed to continue to fight. Additionally, organizations such as the Gig Workers Collective are attempting to create a union of App-based drivers. It should also be noted that Proposition 22 was opposed by President Elect Joe Biden and Vice-President Elect Kamala Harris, who both supported a bill passed by the House of Representatives, but not the U.S. Senate that would seek more classifications in the direction of employees.

The direction of this third model and the impact it might have on the rest of the country is unclear.

Categories: Digital Economy, Government v Tech, Jobs & Industries, Our Communities, Regulation

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