In a resounding vote for the gig economy with far-reaching implications beyond the Golden State, Californians have passed Proposition 22, a measure that claims to jeopardize the future of Uber, Lyft, DoorDash and other app-based labor companies and the livelihoods of the people who drive for them. The new law, passed with nearly 60 percent of the vote after companies spent a record $205 million to secure a profit, maintains the status of these workers as independent contractors, not employees, while offering them some new benefits.
The net result, labor experts say, is that companies will save billions of dollars annually in operating costs, helping to ensure the survival and availability of this type of gig work for the hundreds of thousands of Americans who earn a living or supplement their income by delivering passengers, food and other goods to their desired destinations. But survival comes at a potentially high cost to these workers, who now receive less protection in terms of pay, health care, sick leave and other issues than they would be entitled to as employees. Proposal 22, as Ken Jacobs, chairman of the Labor Center at the University of California-Berkeley, bluntly states, “will take away basic rights and benefits from drivers under the law.
Critically, the new measure is expected to resonate beyond California as other cities and states fight their own battles to regulate gig work. Perhaps it is because so many of these companies – Upper, Lyft, Instacart – are headquartered in California that the state has led much of the national debate on the rights of gig workers. When Sacramento passed a measure last year to urge companies that depend on independent contractors to reclassify many of these workers as salaried employees, it sparked similar legislative efforts in New Jersey, New York, Rhode Island, Pennsylvania and Washington, and it was expected that other states would follow suit. Lindsey Cameron, a researcher and assistant professor of management at the Wharton School, University of Pennsylvania, said: “Labour scholars said this was the biggest change in labour policy in the last 20 years.
The Ubers and Instacarts of the world claimed that the measure, Assembly Bill 5 or AB5, would destroy their business by drastically increasing operating costs, and they have been defending themselves with legal challenges ever since. Then the pandemic dealt a second, potentially fatal blow to gig work: In August, Uber reported a loss of $1.8 billion after a sharp drop in users, and Lyft’s revenues fell 61 percent. Meanwhile, even the independent contractors who were supposed to be the beneficiaries of AB5 and similar legislation seemed to have mixed feelings about efforts to save them from exploitation. Some welcomed the opportunity to maintain traditional protection in the workplace, others complained about the loss of flexibility and feared that the opportunities to make money in the gig economy would dry up.
The passage of Motion 22 is likely to restructure and re-ignite the debate on gig work.
What Motion 22 will do – and won’t do
The enormous sums spent on Prop 22 reflect the high commitment to the result. In fact, according to Ballotpedia, with a total of $225 million spent, the initiative proved to be the most expensive state election measure in recent history. The campaign for its passage was led by Uber, Lyft, DoorDash, Instacart and Postmates and supported by groups as diverse as the California Chamber of Commerce, the California Police Chiefs Association and the California NAACP. The opposition, including many unions and labor rights groups, spent less than 10 percent or $20 million of the total funds invested.
The proposal frees ride-sharing agencies from AB5 so that app-based drivers can continue to be classified as gig workers rather than employees. As a bow to the cost of exploitation that led to the adoption of AB5 last year, the new measure also included a handful of new benefits for drivers that are not normally extended to independent contractors. These include the establishment of a partial minimum wage (only for actual time on the road),