Earlier this week, in a win for gig economy companies, a California appeals court ruled Uber, Lyft, and similar app-based ride-hailing and delivery companies can continue to classify their California drivers as independent contractors pursuant to Proposition 22.
In 2020, California sued Uber and Lyft for violations of state law (AB-5) requiring reclassification of their drivers as employees. In response, Uber and Lyft – together with DoorDash and Instacart – spent a record $200 million to help pass a California ballot initiative (Prop 22). Prop 22, also known as the “App-Based Drivers as Contractors and Labor Policies Initiative,” won California voter approval in the November 2020 general election. It defines app-based transportation and delivery drivers as independent contractors, and adopts unique labor and wage policies for app-based drivers and companies.
In support of the ballot initiative, the companies promised flexibility for workers, including the ability for workers to create their own schedules, along with some benefits. Specifically, Prop 22 includes policies crafted to provide the app-based drivers (classified as independent contractors) with benefits not previously available to them, including:
- 12 hour work limits during a 24-hour period unless the driver has been logged-off for an uninterrupted 6 hours;
- Payments during active delivery time to equal at least (i) 120% of the local minimum wage of the driver’s pickup location, (ii) $0.30 per mile driven during active delivery time, and (iii) 100% of the tips received;
- Company-provided occupation accident insurance of at least $1 million in medical expenses and lost income resulting from injuries sustained while the driver is online and available to take service requests; and company-provided accidental death insurance to benefit a driver’s spouse, children, or other dependents if the driver dies while using the company app;
- Disability payments equal to 66% of a driver’s average weekly earnings (calculated for the 4 weeks prior to the covered injury) for up to 104 weeks; and
- Company-provided healthcare subsidies equal to 82% of the average California Covered (CC) premium each month for drivers averaging 25+ hours per week during a calendar quarter; and subsidies equal to 41% of the average CC premium each month for drivers averaging 15-25 hours per week during a calendar quarter.
In August 2021, the Alameda County Superior Court found two sections of Prop 22 to be unconstitutional and the measure unenforceable as a whole. That ruling was immediately appealed, and Prop 22 remained in effect.
On March 13, 2023, the 1st District Court of Appeal reversed the lower court, determining that Prop 22 should stand, but finding that drivers have a right to join a union and collectively bargain. The court thus severed the provisions of Prop 22 restricting the California Legislature’s ability to authorize collective bargaining over drivers’ compensation, benefits, or working conditions and create rules singling out or otherwise putting “unequal regulatory burdens” upon app-based drivers.
The battle isn’t over yet – the Services Employees International Union (SEIU) is expected to appeal the decision to the California Supreme Court. In the meantime, Prop 22 will remain in effect, but the affected independent contractors will be able to unionize and collectively bargain. We will continue to monitor the situation and provide updates as needed.
If you have questions or need assistance with ensuring your California employees or independent contractors are properly classified, please contact Alex Miller at alex@burnsbarton.com, or your favorite BurnsBarton attorney.
