Proposition 22 Changed the Law, but Challenges Are Pending

• Publication year: 2020
• Author: John P. Kamin, Esq. Woodland Hills, California

Proposition 22 Changed the Law, but Challenges Are Pending

John P. Kamin, Esq. Woodland Hills, California

California's electorate voted to pass Proposition 22 in November 2020 to ensure that gig economy drivers are classified as independent contractors, not employees, but legal and legislative challenges lie ahead that could force some changes. Legal tussles over the classification of drivers for applications (apps) like Uber, Lyft, Grubhub, Postmates, and others have come up for years, and the dust may not settle anytime soon since opposition to the new ballot initiative exists at both the state and federal level. This article takes a look at these developments and provides updates on the challenges and the status of the law in California regarding who, at least currently, is considered an employee and who qualifies as an independent contractor.

Background —AB 5 and Prop. 22

In the workers' compensation arena, the classification of drivers in a gig-economy, app-based business triggers a threshold issue: whether they are employees, covered by workers' compensation insurance, or independent contractors, who are not entitled to workers' compensation coverage.

Even before Governor Gavin Newsom signed Assembly Bill 5 into law in September 2019 (effective for work after 1/1/20), gig economy companies routinely classified their drivers for rideshare and food delivery services as independent contractors. The companies embraced the fact that they presented an opportunity for a "side hustle," providing supplemental income for people acting as independent contractors. The passage of AB 5 made it more likely that such workers need to be classified as employees.

Prop. 22 was designed to fully exempt app-based workers from, among other laws, the California workers' compensation system. The voters' passage of that proposition means that, at least for now, drivers for app-based rideshare and delivery services are not considered employees, in exchange for which they receive additional wages, group health coverage, and accident insurance.

Response to Prop. 22

After the passage of the Prop. 22, gig economy executives of companies like DoorDash and Uber indicated they were now interested in backing similar legislative proposals in other states. The passage of Prop. 22 in a historically blue state like California suggests that other states may well approve similar measures with less conflict along the way.

Labor groups did not sit on their hands after Prop. 22 was passed. A group...