APP-BASED AND RIDESHARING COMPANIES IN CALIFORNIA CAN NOW CLASSIFY WORKERS AS INDEPENDENT CONTRACTORS WITH CERTAIN NEW BENEFITS AND PROTECTIONS
The issue of worker classification in California continues to surprise! Concerned that App-Based and ridesharing companies were wrongfully depriving their “gig” workers the benefits and protections of California labor laws and depriving California of tax revenue, in 2019 the California Legislature enacted AB5. AB5 obligates most companies to classify their workers as employees, rather than independent contractors. Uber, Lyft and other companies failed to comply with AB5, which caused the State of California to turn to the Courts to require compliance. Just last month a California Appellate Court upheld AB5 and found that Uber and Lyft drivers must be classified as employees. Foreseeing a showdown, Uber, Lyft and other App-based and ridesharing companies took the issue to the voters with Proposition 22 – and won. Proposition 22 was premised on the argument that AB5 unfairly deprives gig economy workers of needed job flexibility.
What does Proposition 22 do? Under this new law certain gig workers – those working for ride sharing and App-based companies (Uber, Lyft, DoorDash, Instagram, among others) – are now exempt from AB5 and can be classified as independent workers as long as certain conditions are met. This means that they are not entitled to legal and statutory mandated benefits and protections currently afforded California employees. Proposition 22 does, however, provide protections for gig workers of ride sharing and App-based companies, albeit to a far lesser extent than workers classified as employees are currently entitled to enjoy.
The list of new limited benefits for gig workers includes the following:
(i) a health care subsidiary,
(ii) contributions under the Affordable Care Act (ACA),
(iii) minimum earnings guarantee tied to historical hours worked,
(iv) reimbursement for vehicle expenses,
(v) accident insurance,
(vi) protection from discrimination and sexual harassment,
(vii) guaranteed flexibility – the freedom to work when (dates and times) and how they want to work,
(viii) the right to work for competitors,
(ix) certain protections against termination, and
(x) the right to receive the full amount of gratuities provided by customers.
The carve out for this limited class of gig workers is unprecedented. It would take 7/8 majority of the California Legislature to overturn this law; so, this new law will likely be permanent. Workers who do not fall within the narrow definition of qualified gig worker status workers will continue to be classified as employees. For most companies, Proposition 22 will have no impact on their obligation to classify most workers as employees and comply with California Labor laws and regulations. Keep your eye on this issue; it is likely to continue to shift on a regular basis.
This blog is written as of November 4, 2020. Recommendations and legal requirements are changing rapidly, so please continue to review our legal updates or review postings on relevant government websites.
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