In the recent election, California voters overwhelmingly passed Proposition 22.
The passage of Prop 22 means that firms like Uber and Lyft can legally classify their drivers as contractors instead of employees. And it has also effectively created a new, 3rd way to classify workers.
The reason is Prop 22 requires firms like Uber and Lyft to provide their drivers with benefits not normally given to independent contractors.
Other countries have long had third ways to classify workers.
Most countries refer to them as "dependent contractors" and they get some, but not all, of the benefits and legal protections associated with being a traditional employee.
But the U.S. has only had two classifications (with some minor exceptions). By law you are either an employee or a nonemployee. And nonemployees don't receive many of the benefits and labor protections that those classified as employees get.
To comply with Prop 22 - which only applies to "app-based drivers" retained by "network companies" - hiring organizations (such as Uber and Lyft) must provide a set of benefits normally not provided to contractors or gig workers.
J.D. Supra's article Reconciling the Gig Economy in California: Changes to Worker Classification Laws Since AB 5 nicely covers these. Key quote:
Proposition 22 provides several legal employment benefits and protections that are required in California for workers classified as employees. For example, app-based drivers now have a guaranteed "net earnings floor" comprised of 120 percent of the applicable minimum wage of the worker's "engaged time," guaranteed tips and gratuities, and a guaranteed quarterly healthcare subsidy. Proposition 22 also requires the applicable companies to provide occupational accident insurance to cover at least $1 million in medical expenses and lost income resulting from injuries suffered while a driver is online, and disability payments of 66 percent of a driver's average weekly earnings before the injuries suffered. Proposition 22 further requires the applicable company to provide accidental death insurance for the benefit of a driver's spouse, children, or other dependents when the driver dies while using the app.
Under current worker classification laws, companies effectively cannot offer nonemployees benefits like those described above. The reason is providing these benefits would be seen by regulators and the courts as evidence that a nonemployee should be classified as an employee.
So offering these types of benefits would lead to companies being forced to classify the workers as employees and would also expose them to very expensive legal actions.
But under Prop 22, they have to be offered, which is why Prop 22 has effectively created a 3rd way to classify workers - at least in California for a relatively small subset of gig workers (rideshare and delivery drivers).
But we think other states will adopt laws that create various forms of 3rd ways to classify workers.
The reasons are our current classification laws clearly aren't working, the gig economy continues to expand, and attempts to modify existing laws - like California's AB5 - have been a mess.
We've not been in favor of a 3rd way to classify workers.
Our view has been it would lead to greater confusion and even more lawsuits and legal issues than we currently have.
We're also concerned that a 3rd way to classify workers will lead to more workers losing out on the benefits and protections that come with traditional employment status.
But AB5 has shown that trying to fit gig work into our current laws simply doesn't work. And because of that, we now think a 3rd way to classify workers is the best way to move forward.
