The results are in. Voters in California don’t want their rideshare and app-based delivery services to change.  By an overwhelming majority, Proposition 22 was approved by California voters.  Essentially, that means that unlike all other businesses in California that have to meet the strict Dynamex ABC test or, if they are exempted from this test, the more rational multi-factor Borello test, companies in these gig economy industries now have a safe harbor, so long as they provide the benefits set forth in Prop 22 to their independent drivers and couriers.

What are those benefits?

• Earnings Minimum. Companies must pay 120% of the local minimum wage for each hour a driver spends driving, but not time spent waiting.
• Health Insurance Stipend. For drivers who normally work more than 15 hours per week (not including waiting time), companies are required to help pay for health insurance.
• Pay For Costs When a Driver Gets Hurt on the Job. Companies must pay medical costs and replace some lost income when a driver is injured while driving or waiting.
• Rest Policy. The law prohibits drivers from working more than twelve hours in a 24-hour period for a single rideshare or delivery company.
• Other Requirements. Prop 22 prohibits workplace discrimination and requires that companies: (a) develop sexual harassment policies, (b) conduct criminal background checks, and (c) mandate safety training for drivers.

What does this mean for other companies using independent contractors?

The full ramifications of this Proposition are not yet known, of course.  But apart from providing a safe harbor for rideshare and app-based delivery companies in California, this may spur some state legislators in other states to consider laws similar to Prop 22.  However, only California and Massachusetts have statutes with an ultra-strict ABC test for independent contractor status. Therefore, there is little reason for many states to change their longstanding tests for independent contractor status.  Instead, they may choose, as the Florida legislature has done, to carve out an exception for rideshare or app-based delivery companies from the general state law test for independent contractor status.

Some companies using independent contractors may view this result on Prop 22 as somehow relieving them from state and federal independent contractor misclassification laws. That would be a mistake.  Even rideshare and app-based delivery companies are still governed by federal law tests for independent contractor status as well as varying state law classification tests outside of California, and they remain subject to any pending legal challenges under those laws.  Other companies that rely upon independent contractors may wish to enhance their compliance with applicable state and federal independent contractor laws.  One way is to use a process such as IC Diagnostics™, where a company’s independent contractor relationships can be structured, documented, and implemented in a customized and sustainable manner consistent with its current business model. This process includes the use of effectively-drafted arbitration agreements with class action waivers.