Over the course of the pandemic, many Americans turned to app-based food-delivery services at unprecedented levels. The Wall Street Journal reported that between March-April 2020, as many localities imposed lockdowns or individuals themselves decided to self-quarantine, new customer acquisitions by food-delivery services increased from 19,810 to 33,376 customers. This sharp increase in business for app-based delivery services highlighted the growing reliance on gig economy workers for performing particular services.
At the same time, the growth in profits, companies’ expansion of delivery services, and the pandemic’s general impact on the gig economy led many to question whether gig economy workers should be classified as employees or not. Leading app-based delivery/ride-hailing companies such as Uber, Lyft, and DoorDash were already starting to consider the impacts of having to classify their part-time drivers as actual employees. Worker classification has been at the center of the debate in California over legislation (Assembly Bill 5) and ballot measures (Proposition 22), with their importance to these companies evidenced through their vigorous support of Proposition 22.
What is Proposition 22, and Who Supports It?
Proposition 22 is a ballot measure that was approved by California voters in November 2020, winning 58 percentof the vote. It says that in California, delivery/ride-hailing companies can continue to classify their drivers as gig economy workers, or independent contractors, rather than employees. Proposition 22 was a response to California’s Assembly Bill 5, passed in January 2020, that required companies to classify independent contractors, including gig economy workers, as actual employees. Proponents of Assembly Bill 5 argued that gig companies were exploiting their drivers by not providing the benefits that traditional employees receive, such as health coverage, minimum wage, paid leave, and overtime.
Uber, Lyft, DoorDash, and Postmates immediately refused to comply with the new law and launched their efforts to seek an exemption through bankrolling Proposition 22, allegedly spending a combined $200 million on its passage. They did so through forming a coalition called “Protect App-Based Drivers & Services Coalition.” It is not hard to see why these companies invested so heavily in Proposition 22, because Assembly Bill 5 would severely complicate their businesses’ models, all of which are dependent on large numbers of gig economy workers. Having to classify gig workers as employees and providing them with the benefits of employee status would translate to much higher costs for these companies and would likely necessitate the reduction of available drivers.
Aftermath of Proposition 22’s Passage
Gig economy delivery and rideshare drivers for Uber, Lyft, and other app-based companies had mixed responses to Proposition 22’s ballot approval. Some said that Proposition 22 essentially gave companies full permission to cut their payments per ride – eventually causing a group of drivers and a union to contest Proposition 22 in court. Others argue that forcing companies to comply with Assembly Bill 5 by classifying them as employees would reduce the flexibility and autonomy they enjoy as independent contractors, and therefore support Proposition 22.
Given the support for Proposition 22, it came as a shock when a judge from California’s Alameda County Superior Court struck down Proposition 22 in August 2021, declaring it is both unconstitutional and unenforceable. Judge Frank Roesch argued that the measure’s unconstitutionality comes from its undermining of the legislature’s power to intervene in matters regarding worker compensation; because Proposition 22 was a ballot measure and not a constitutional amendment, Judge Roesch said that it had no authority to do so. In immediate response to the court’s ruling, the companies represented by the Protect App-Based Drivers & Services Coalition started the appeals process – underscoring the importance of Proposition 22 and how much has already been invested in its passage. Currently, Proposition 22 is working its way through the appeals process, which could take up to a year, and is expected to end up at the California Supreme Court.
While the future of Proposition 22 remains unclear, the debate it has raised underscores the difficulties that are arising as more people turn to the gig economy, and uncertainties over how gig workers should be legally classified. Additionally, Proposition 22 and the assembly bill that spurred it have highlighted both the benefits and drawbacks that come with gig work compared to traditional jobs. Gig jobs offer much more flexibility, but also come with unsteady pay and few benefits. It will be interesting to see whether Proposition 22 is struck down by higher courts in California, and what it means for the classification of gig economy workers at a broader level.