The Fight Against Prop 22 Is Not Over

On November 3, 2020, California voters passed Proposition 22, which will allow gig economy companies such as Uber and Lyft to avoid having to classify their drivers as employees.  On January 12, 2021, a group comprised of app-based drivers, consumers, and the Service Employees International Union filed the first legal challenge to Prop 22, bringing the fight over the largest anti-union campaign in the state’s history to the courts.

The Petitioners sought an emergency Writ of Mandate from the California Supreme Court, seeking to render the successful ballot measure “invalid and unenforceable.”  Petitioners requested the Court expedite its review of the Petition.  However, last week, the California Supreme Court denied the writ petition without prejudice and the matter has been re-filed in Alameda County Superior Court.

Uber, Lyft, and other gig economy companies spent more than $200 million on the proposition, which made it the most expensive initiative in California history.  The new law allows Uber, Lyft, and other gig economy companies to avoid AB 5, which took effect January 1, 2020 and which codified an “ABC test” approach to determination of whether workers are “employees” for the purpose of most California labor and employment laws.  The proposition created a special category of “app-based drivers” who are treated neither as employees nor as independent contractors under any established test.

Petitioners’ Writ argues that Proposition 22 violates Article XIV of the California Constitution, because it would limit the Legislature’s authority to provide for a full and complete system of workers compensation for app-based drivers by requiring a 7/8 majority of the legislature to change the Proposition.  They argue that this fact would render the entire proposition unenforceable.  Petitioners further argue that the law violates Article II of the state Constitution by limiting the Court’s ability to determine what constitutes a legislative amendment to the law, and because the proposition violated the “one subject rule.”

On its face, Proposition 22 purports to offer several benefits to drivers, including a promise to pay drivers 120 percent of the minimum wage, reimbursement for expenses, and health benefits.  A UC Berkeley Labor Center report regarding effects of the proposition on driver earnings, however, highlights the misleading nature of the proposition as it relates to actual driver earnings:

  • Although the proposition promises driver pay of at least 120 percent of the minimum wage, (which the report assumed would be $15.60 in 2021), the report notes that drivers are not paid under the proposition for time they are not “engaged,” which means drivers are not paid for time while waiting between passengers or returning from trips to outlying areas. 
  • The report estimates that this amounts to approximately 33 percent of what would be considered work time for statutory employees. 
  • The report also notes that, although the proposition provides for reimbursement for drivers for mileage expenses, drivers will not be reimbursed mileage for miles driven when they are not engaged, averaging an estimated 6.6 miles per hour of miles that will not be reimbursed. 
  • In addition, the report notes that reimbursement rate would be 30 cents per mile, as opposed to the current IRS rate of 57.5 cents per mile.
  • Further, although the proposition offers a health care stipend to drivers who are enrolled in a qualifying health plan and some occupational accident insurance (and at levels well below protections required for California employees), the report concludes that these benefits are greatly offset by the fact that drivers would be required to pay both the employer and employee share of payroll taxes and would receive no paid breaks, no paid sick leave, no unemployment insurance, no workers compensation coverage or other benefits employers must provide employees under state and federal law.

Taking all of these factors into consideration, the report concludes that the proposition really only promises a wage floor of $5.64 per hour.

In the two months since the law’s passage workers are already seeing the ill effects of this measure.  In Los Angeles it was reported that some grocery chains currently using direct employees as delivery drivers would switch to an app-based driver model.  In addition, Uber and Lyft plan to try to replicate the Prop 22 model throughout the country, most notably in Illinois and New York.

For more information, please contact your labor law counsel.

By Jannah Manansala and Corey Kniss | February 19, 2021

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