Pixel Envy

Written by Nick Heer.

Ride Sharing and Delivery Drivers in California Will Not Be Classified as Employees

Michelle Cheng, Quartz:

California voters on Nov. 3 approved Proposition 22, a statewide ballot initiative attempting to redefine the employment status of gig workers in the app-based economy.

The yes vote on Prop 22, the costliest ballot initiative in California history, means that app-based ride-hailing and delivery companies won’t need to classify workers as employees instead of contractors, or pay into benefits like workers compensation and health insurance in California.

Uber has long campaigned for a “third way” of classifying workers, with drivers receiving limited benefits while still being classified as contractors. Prop 22 guarantees gig workers new, limited healthcare subsidies and accident insurance, some reimbursement to account for gas and other vehicle costs, and a “minimum earnings guarantee” equal to 120% of the minimum wage applied to the drivers’ “engaged” time (defined as the time between accepting a ride request and completing the trip).

Those concessions were offered in exchange for an exemption from a new state labor law, known as AB5, which makes more difficult for businesses to classify California workers as contractors.

Uber, Lyft, DoorDash, and other companies exploit independent contractor classification as a core component of their business model, and AB-5 was explicitly painted as a remedy. But gig economy companies spent over two hundred million dollars to pass an initiative that exempts them from these terms, so now AB-5 only applies to a handful of freelancers who are still feeling the effects of the poorly-defined legislation. It was and remains, in principle, a worthwhile effort to protect independent contractor classification from abuse through legislation. But AB-5 failed to achieve those goals and has punished people who clearly ought to be considered freelancers.