Uber and Lyft Drivers to Remain Independent Contractors Thanks to California Voters

Proposition 22, a California ballot proposition intended to prevent ride-hail drivers from employee reclassification, successfully passed as of November 3rd, 2020.

This win for Proposition 22 came after rideshare titans Uber Technologies and Lyft spent $200 million to circumvent a ruling from earlier in the year which would have required them to reclassify their drivers as employees rather than independent contractors or “gig” workers.

Employee classification would have required these companies to provide drivers with minimum wage protections, overtime pay, and other employee benefits.

In May of 2020, the State of California sued both of these ride-hail companies for failing to comply with AB5, an employment bill which classified ride-hail drivers among other traditional gig workers as employees. The judge ruled in favor of the state, but Uber and Lyft immediately appealed the ruling, arguing that to comply with AB5 would require a complete restructuring of their business model, and would actually take away the very freedoms credited with attracting drivers to their business.

Uber and Lyft pointed out that Proposition 22 preserved the flexibility in their business structure that appeals to customers and drivers alike.

To understand what flexibility refers to here, it’s important to understand the ride-hail business model. These companies are designed to work for customers who open an application on their phone at any time, night or day, and the nearest driver working for that ride-hail service will pick up the customer and take them where they want to go. Due to the random nature of the hours that customers can be expected to need rides, flexibility is an important component of this model. For drivers who are only using their ride-hail work as a way to supplement current income or because they only wish to work part-time, this model also allows them to choose whenever they do or do not want to work.

Uber and Lyft claim they will be offering alternative benefits to those which would have been assured under AB5.

While ride-hail drivers still will not receive certain employee benefits such as sick pay and health insurance across the board, the companies do promise to provide a guaranteed minimum wage and subsidized health insurance for drivers who average 25 hours of work each week. For drivers who use ride-hail work as a way to supplement existing income, the flexibility offered as an independent contractor seems too valuable to lose. However, critics of the proposition still believe it provides little protection for people who rely on ride-hail driving for a significant portion of their income.

So, while Proposition 22 benefits gig workers who do not rely primarily on the income they make from driving, as well as benefiting Uber and Lyft by negating any restructuring costs and allowing them to keep their impressively high profits as high ever, it does leave something to be desired for people whose primary earning comes from ride-hail driving.

The passing of Proposition 22 presents an interesting example of the future of labor law adversity.

Regardless of the concerns of those who were for or against the proposition, the passing of Proposition 22 is expected to change the landscape of labor law challenges far into the future. With massively successful companies like Uber and Lyft able and willing to throw incredible amounts of money at anything which might restrict their current ways of doing business, it does raise the question of how much strength labor laws truly have to move companies that grow to break the scales with their financial weight.