Proposition 22 and App-Based “Gig” Workers

California voters have adopted Proposition 22, which allows companies such as Uber and Lyft to treat their drivers as independent contractors. California’s Labor Code and its Courts otherwise presume that workers are employees, unless they meet all three parts of the ABC Test to determine who is an independent contractor. With Proposition 22, a major exception to this test has been carved out for several big tech corporations. As a result, their workers will not be considered employees and will not be entitled to minimum wage, overtime pay, meal and rest breaks, and Workers’ Compensation, at least not in the traditional sense. However, Proposition 22 does provide for some limited benefits that independent contractors would not ordinarily be entitled to by law. In essence, Proposition 22 has created a third category of worker, between a traditional employee and a traditional independent contractor. An experienced employment attorney at Spencer Young Law can help you understand your rights if you fall into this new category.

Who is Affected by Proposition 22?

Proposition 22 applies to workers who:

• provide delivery services on an on-demand basis through a business’s online-enabled application or platform, or who
• use a personal vehicle to provide prearranged transportation services for compensation via a business’s online-enabled application or platform.

“On-demand” means that work assignments come directly from the consumer.

Example 1: Malina is hired by a large mail-order distribution company to deliver packages from a regional distribution site to nearby cities. She is required to use her personal vehicle, but is reimbursed for all mileage and upkeep. Every day she reports to the distribution center and receives a list of packages to load into her car and deliver. Proposition 22 should not apply to Malina, because she is not delivering on an “on-demand” basis, and it is not clear that a particular online-enabled application or platform is necessary for her to get work. She would still be considered an employee, unless she otherwise meets all the requirements of the ABC Test.

Example 2: Tri-Valley Ground Transport Co. owns a fleet of luxury sedans, which it stores at its garage. It has hired a crew of drivers to drive around specific areas during specific shifts, waiting for customers to hail rides through its own online-enabled application. While driving for this company might feel similar to driving for Uber, Proposition 22 should not apply, because the drivers are not using their personal vehicles.

Example 3: Paul uses his own vehicle to drive for Shyft, which uses an online platform to connect riders with drivers. Riders pay Shyft, which pays Paul a certain amount for each ride. Proposition 22 most likely applies to Paul, which triggers certain obligations by Shyft.

What Benefits does Proposition 22 Establish?

• A “net earnings floor” equal to 120% of the minimum wage for each employee’s “engaged hours,” plus $0.30 per “engaged mile.” “Engaged hours” and “engaged miles” include the time and distance between accepting a ride or delivery request and completing it. If a driver’s actual net earnings fall below this floor, they must be paid the difference.
• Health insurance subsidies equal to 41% of a Covered California premium for workers averaging 15-25 hours per week, and 82% of the Covered California premium for workers averaging more than 25 hours per week.
• Occupational accident insurance for medical expenses and loss of income incurred when the workers is using the online app – even if they are not currently “engaged.” This is the closest equivalent to Workers’ Compensation, which would be available if the workers were considered employees.
• Accidental death insurance if death occurs while using the app.

Proposition 22 can only be modified or repealed by 7/8 vote of the State Legislature. Thus, it is likely to remain in effect for some time. Because it has created a new category of worker, workers and employers alike may be unsure whom it applies to, or how it should be implemented. If you have any questions about your rights as a worker, or your obligations as an employer, call Spencer Young Law today for your free consultation!