Ride-Sharing Companies Drive Home Victory With Ballot Measure

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The battle over how to label workers in the gig economy continues in California, with voters approving a new measure exempting ride-sharing companies from a state law declaring drivers to be employees.

Proposition 22 permits app-based driving companies such as Uber and Lyft to classify their drivers as independent contractors and not employees, exempting the companies from Assembly Bill 5.

That law formalized an April 2018 California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, where the court established a three-part “ABC test” that presumptively considered all workers to be employees unless the hiring entity can satisfy three conditions.

But AB 5 and Dynamex will no longer apply to the ride-sharing companies. Instead, Proposition 22 established certain benefits for drivers, including guaranteed earnings of 120 percent of minimum wage, $0.30 reimbursement per mile for gas expenses and quarterly healthcare subsidies for drivers who work at least 15 hours per week.

The “Exempts App-Based Transportation and Delivery Companies from Providing Employee Benefits to Certain Drivers” measure also provides accident insurance for on-the-job injuries, an appeal process for deactivated drivers, and anti-discrimination and sexual harassment prevention protections.

However, passage of Prop 22—by a 58 percent margin—means drivers are not covered under workers’ compensation, sick pay or family leave laws, as they would be if classified as employees.

California Attorney General Xavier Becerra sued the companies in May for violating the statute. In August, a trial court judge ordered the companies to classify their drivers as employees, a decision affirmed by a state appellate panel on October 22 in People v. Uber Technologies, just weeks before the vote on Prop 22.

Also complicating matters: The state’s highest court heard oral argument on November 3 as to whether Dynamex has retroactive effect in Vazquez v. Jan-Pro Franchising International, Inc.

The attorney representing the workers argued that Dynamex represented an “evolution” of the state’s employment law on worker classification and should have retroactive effect.

“There are no special circumstances raised here for the court to go against its usual rule that cases it decides will apply to the time period prior to the decision,” she told the court, adding that Dynamex “wasn’t an adoption of a completely new and distinct standard” but a clarification of the existing analysis.

Counsel for the defendant avoided the issue of retroactivity and instead focused on an argument that the ABC test wasn’t applicable because his client didn’t actually hire the workers.

To read Proposition 22, click here.

Why it matters: The passage of Prop 22 was a huge victory for ride-sharing companies and could provide a model for similar legislation in other states, as well as other industries in the gig economy.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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