By: Elliot Hangos
This past month, Uber, Lyft, and other gig economy companies had a small victory as the California appeals court ruled that Proposition 22 (“Prop. 22”), a voter-approved law since 2020, should remain state law. Prop. 22 allows gig economy companies to continue to treat their workforce as independent contractors, instead of employees. The California appeals court’s decision to overturn parts of the 2021 superior court holding by Judge Frank Roesch, such that Prop. 22 violates the state’s constitution, is a potential setback for the gig workers and the Service Employees International Union (“SEIU”). The most recent ruling ensures drivers will have the ability to unionize and collectively bargain.
Uber and Lyft alone employ tens of millions of people for completing individual tasks, such as a food delivery or a car ride. Because gig workers are considered contractors, most U.S. federal and state labor laws (e.g., minimum wage and overtime pay), do not apply. Thus, as Uber and Lyft continue to grow, they still have a long way to go towards reshaping their public image and the gig economy as a whole.
The current progress of the gig economy and its law is a credit to the industry’s foundational corporations, Uber, Lyft, DoorDash Inc., and Instacart Inc. Even prior to Prop. 22, California’s gig economy helped to pass an Assembly Bill (“AB 5”) in 2019, codifying a rule from Dynamex Operations W. v. Superior Court, known as the ABC test. Under AB 5, the ABC test demonstrates that a worker is an independent contractor if (a) the worker is “free from the control and direction of the hiring entity in connection with the performance of the work,” (b) the worker performs work that is “outside the usual course of the hiring entity’s business[;]” and (c) the worker “is customarily engaged in an independently established trade, occupation, or business of the same nature . . . .” This draconian law is fundamental to Uber and Lyft’s business model because it distinguishes the classification of a worker as an employee or an independent contractor. The benefits and regulations found in the California Wage Orders are only afforded to employees.
Without access to the protections established by the California Wage Orders, why would someone want to join the gig economy? The largest gig companies expected this question and financed a $205 million campaign ahead of the 2020 general election, wherein California citizens were to vote on Prop. 22. In order to preserve the ability to treat their workers as contractors, these gig companies took the initiative in creating the most expensive ballot measure in California history, used to advertise to their riders and drivers. The advertisements involved in-app notifications, emails, and TV and digital media with messaging that suggested voting “yes” to Prop. 22 would help institutionalize protections and benefits for drivers. On November 3, 2020, Prop. 22 won by three million votes and is still in effect today. In response to the California appeals court decision, Mike Robinson – an Uber and Lyft driver, as well as a plaintiff with SEIU in the suit against the California government – stated that his benefits have not improved in the two years since Prop. 22 was enacted, as it allows companies to “deprive [gig workers] of a living wage, overtime, paid sick leave and meaningful health care coverage.”
The benefits that were promised in Prop. 22 do not meet expectations. For example, the health stipend offered to Uber drivers who hit a minimum amount of “active hours” per week only accounts for a fraction of the lowest coverage available to families under the Affordable Care Act. Similarly, Prop. 22’s promise to tie driver’s hourly wages to 120 percent of the state minimum wage would have equated to $15.60 per hour in 2021, assuming the minimum wage is $13. A study by the UC Berkeley Labor Center determined that when drivers consider hidden expenses, such as unpaid waiting time, unreimbursed waiting time costs, and payroll taxes, this figure is closer to $5.64 per hour. Verifiably, some gig workers have reported that their pay has decreased since Prop. 22’s passage.
The three-judge panel’s ruling that Prop. 22 is constitutional exhibits how businesses can use legislation to modify the landscape to their liking. In the meantime, the SEIU plans to appeal the panel’s decision while drivers will continue to face the plethora of issues that have overrun their flexible, independent careers.
Student Bio: Elliot Hangos is a second-year law student at Suffolk University Law School. He is a staffer on the Journal of High Technology Law. Elliot received a Bachelor of Business Administration in Marketing and Sports Management from The George Washington University.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
