Fallout over gig worker proposition is only just beginning

The reaction to the passage of Proposition 22, the measure that eviscerated Assembly Bill 5 and the Dynamex decision, was both swift and devastating. Southern California grocery chain Albertsons, which includes Vons, Pavilions and other major stores, announced the termination of its delivery driver workforce across the state effective in late February. At that time, the drivers' work will be moved to "third-party logistics providers" such as Instacart, whose drivers have now been classified independent contractors by virtue of the ballot measure.

It was a completely unexpected outcome, but one that could -- and should -- have been foreseen by employment law experts. Why on earth wouldn't grocery stores choose to duck the higher costs associated with employees when they could easily save money by outsourcing the same work to independents? Beyond the hourly wages, payroll taxes, and other "inconveniences" of maintaining a W-2 workforce, the companies would also avoid the burden of paying for liability insurance on captive fleets of delivery vehicles and the maintenance of same.

The incontrovertible math speaks for itself. It's undoubtedly good for business. But the damage to workers is huge and potentially far-reaching. In the darkest days of the pandemic, when more housebound people than ever are dependent on delivery of groceries and other essentials, an essential workforce is being discarded like so much spoiled produce.

It is not only deplorable; it clearly does not target the pernicious harm that Prop. 22 was, ostensibly, designed to address. Voters who were sold a bill of goods by the likes of Uber and Lyft believed they were protecting the livelihoods of workers in the gig economy. They did not anticipate that they would be putting hundreds of existing employees -- not gig workers -- out of work by endorsing the "App-Based Drivers as Contractors and Labor Policies Initiative." Had they understood the potential consequences of their support, the outcome at the polls may well have been different.

And this is just the first domino to fall. It may only be a matter of time before other employee groups, including employees who drive company vehicles for businesses such as pizza chains and pharmacies, find themselves applying for unemployment. Instacart may become as ubiquitous as Amazon in the "third-party logistics provider" sector. Is that really what we want? Is that truly helping the poor gig worker whose livelihood was of such concern to the Prop. 22 voter?

As long as Prop. 22 remains in effect, the Albertsons model is likely to be the first choice of companies whose drivers are not unionized or who are otherwise protected from termination. A lawsuit filed January 12 in the California Supreme Court is now seeking to overturn Prop. 22. Castellanos et al. v. California et al., S266551. The complaint, filed by gig drivers and a labor union, claims that Prop. 22 unconstitutionally limits the Legislature's power to implement a workers' compensation program or to pass future legislation concerning workers' rights and that it violates the California Constitution requirement that ballot measures address a single subject.

As we await the state Supreme Court's decision, it is worth noting that federal actions could also derail the growing movement to make gig drivers, not just in California but nationwide, independent contractors. President-elect Joe Biden, a vocal proponent of AB 5, has supported the PRO Act, which would replicate the AB 5 model at the federal level. If Prop. 22 were to be rendered ineffectual by superseding legislation at the federal level, the equation that now makes Instacart a no-brainer for Albertsons grocery stores could become problematic. The 10th Amendment reserves to the states all powers not expressly given to the federal government, including the right to establish conditions and benefits of employment. However, laws can be drafted in a way that moves a large swath of gig workers out from under state law and makes them subject to federal law.

Biden has long been an ardent advocate for labor unions, and he is expected to continue working on behalf of organized labor once in office. His administration can conceivably create a Prop. 22 workaround by pursuing an amendment to the Fair Labor Standards Act, which would provide gig workers with the right to unionize -- a goal they have long sought. Such a move would bring unionized gig workers -- including those delivering groceries through "third-party logistics providers" -- squarely within the framework of federal law. Even without passage of the PRO Act, this change could effectively preempt state employment laws, most significantly Prop. 22, that are at odds with federal mandates.

As we await further action at the judicial and legislative levels, expect to see additional fallout from Prop. 22. Gig drivers, already forced to bear the costs of insurance and wait times without any safety net, will now be saddled with the knowledge that they've stripped other workers of their employment status. What a sad outcome. 

Ronald Zambrano is the employment litigation chair at West Coast Employment Lawyers, where he represents victims of workplace discrimination and harassment, wrongful termination, whistleblower retaliation and wage and hour violations.