Proposition 22 money may have simply bought (expensive) time

You can buy a lot with $200 million. The most expensive ballot proposition in California's history delivered almost exactly what its sponsors were looking for. Uber, Lyft, DoorDash and Instacart seem to have engineered an end-run around Dynamex and Assembly Bill 5, convincing voters that drivers are better off as independent contractors, rather than employees. But what they may have bought for themselves is simply (very expensive) time.

As the post-election dust settles, it's worth remembering all the reasons why AB 5 was enacted and Proposition 22 was a bad choice. Workers whose services are the backbone of an industry deserve protections that only employment status will afford. These include guaranteed minimum wages, unemployment benefits, meal and rest breaks, and protections against harassment and discrimination.

The companies had argued, apparently convincingly, that they could not adopt an employment model unless they were able to exert more control over their drivers, but nothing in AB 5 ever required them to establish rigid schedules for their workers. That taxpayers were forced to underwrite unemployment benefits for the thousands of drivers sidelined by the coronavirus pandemic should have dictated a different Prop. 22 result. Imagine how far the millions of dollars spent promoting the initiative would have gone toward providing those benefits in the form of payroll taxes?

But that's all water under the bridge now. Until things change -- and they almost certainly will -- the app-based driver workforce will be classified as independent contractors, not entitled to the benefits and protections of employment under the law. In what must have been considered a devil's bargain, however, the rideshare and delivery companies have extended benefits not previously available to their drivers. The end result is a slightly better situation for drivers but still no true safety net.

Neither an employee nor an independent contractor, the gig driver under Prop. 22 is essentially a new classification of hybrid worker. Not surprisingly, this hybrid is regulated in favor of the corporation, given that its architect is that very corporation.

Proposition 22 added to Division 3 of the Business and Professions Code, and designates gig drivers as independent contractors entitled to job flexibility while also recognizing that they need economic stability. The law guarantees drivers 120% of the minimum wage, based on a driver's active time on a trip or en route to one. This means that time waiting for fares will remain unpaid, which potentially can amount to many hours per week. Drivers who work at least 15 hours per week will receive a healthcare contribution, equivalent to 50% of the employer-provided average under the Affordable Care Act, and those working 25 hours per week will get the equivalent of a 100% contribution. But drivers only qualify based on their active time, not the actual number of hours they spend on the app.

When a California superior court judge ordered the app-based driving companies to immediately designate their drivers as employees, Uber and Lyft threatened to shut down in California rather than comply. A court of appeal decision granted them a small reprieve, giving them several months to comply with the order.

Although the lawsuit will continue, Prop. 22 will drastically reduce its scope. The state (and private plaintiffs) will continue to seek penalties for the time between January and the certification of the election results, when, it says, Uber and Lyft flouted the law.

Beyond this, Prop. 22 will undoubtedly face court challenges. The legislature, through AB 5, codified the Dynamex ABC test and chose not to exempt gig workers from the same. To legislate against AB 5 is to challenge the judiciary's purview, a move that may be unconstitutional.

Expect the state, backed by labor groups, to take Prop. 22 to the 9th U.S. Circuit Court of Appeals. Dynamex is unlikely to be overturned, and the companies will have simply bought themselves two or three years of respite. Alternatively, the legislature could take the unprecedented step of redrafting AB 5 in order to respond to industry concerns without altering the fundamental ABC equation. Gig drivers will then become a different hybrid category of employee-independent contractors. 