Proposition 22 was a ballot initiative in California that became law after the November 2020 state election, passing with 59% of the vote and granting app-based transportation and delivery companies an exception to Assembly Bill 5 by classifying their drivers as "independent contractors", rather than "employees".[1][2][3][4] The law exempts employers from providing the full suite of mandated employee benefits (which include time-and-a-half for overtime, paid sick time, employer-provided health care, bargaining rights, and unemployment insurance) while instead giving drivers new protections:
120 percent of the local minimum wage for each hour a driver spends driving (with passenger or en route), but not for time spent waiting
$0.30/mile for expenses for each mile driven with passenger or en route
health insurance stipend for drivers who average more than 15 hours per week driving
requiring the companies to pay medical costs and some lost income for drivers hurt while driving or waiting
prohibiting workplace discrimination and requiring that companies develop sexual harassment policies, conduct criminal background checks, and mandate safety training for drivers.[5][6][7][8]
The initiative became state law after passage in November 2020, was challenged in California state courts in 2021, and was upheld on appeal in 2023. Proposition 22 awaits a California Supreme Court decision on its constitutionality.
Background
In 2019, Assembly Bill 5 was passed, and it was designed by lawmakers to require companies to classify ride-hail drivers and other gig-economy workers as "employees".[7][9] It requires companies to classify all workers as employees unless companies can prove that the workers: are not directed or controlled by the company during their work time, and their work is not the company's "core" business, and the worker has their own business doing that type of work.[7]: 1[9] Lyft and Uber refused to comply with this law, and stated a desire to keep drivers classified as independent contractors.[10][11][8][12]
In August 2020, the California court ordered Uber and Lyft to comply with the law within a 10-day deadline.[13][14]: 1 The companies said they would shut down their operation in California if drivers had to become employees.[2][15][16] On August 20, the deadline day, the companies asked for an extension. The court granted an extension until November 4, 2020, on the condition that Uber and Lyft CEOs provide a sworn testimony by October 4 confirming their plan to comply with AB 5.[15][2][17] The companies indicated they would no longer shut down.[18] The ride-hail companies, joined by DoorDash and Instacart,[2] supported Proposition 22 for the November 3, 2020, ballot election, which was held one day prior to the extended AB 5 deadline on November 4.[17]
In an opinion piece in The New York Times, Uber's CEO Dara Khosrowshahi advocated for the legal creation of a third employment classification between the current mutually exclusive classes of "employee" and "independent contractor", claiming it was necessary to allow gig workers to have the flexibility and freedom to fit work into their schedules, while also allowing companies to provide some benefits for them without being forced into the full requirements associated with "employee" classification. According to Khosrowshahi, the employee classification does not allow schedules chosen by the employee, or under 40 hour schedules like the "independent contractor" classification does.[19][2][20][16] He also called for benefits funds, which would pay workers extra cash for each hour worked, that they could use for the benefits they want, (like health insurance or paid time off), while allowing them to work for multiple different companies, all of which would give them cash for this benefit fund based on the hours worked for each company.[19][2][7][16]
Driver earnings
In July 2020, before Prop 22 passed, the California Legislative Analyst's Office stated in an analysis of the Proposition: "Most drivers work part time and many drivers only work for a short time or only drive occasionally." and "Most drivers probably make between $11 and $16 per hour, after accounting for waiting time and driving expenses."[5][21]
Projected Effects
Number of drivers
Uber said that 90% of their 1.2 million drivers nationwide work less than 40 hours per week, with 80% working less than 20 hours per week, and that if they were required to classify drivers as employees, they would terminate 80% of their drivers because their nationwide business can only support 250,000 full-time jobs.[6][22][14]: 1[21]
Fares
A study released by Uber found that if rideshare companies were required to comply with AB5, it would increase fares to rideshare consumers by 25-100%, depending on the market.[23]: 1[24]: 1[21]
Reception
Support
Lyft, Uber, DoorDash, Instacart, and Postmates contributed over $205 million into campaigns supporting Prop 22, making it the most expensive ballot measure in California's history.[11][25][3] This included major funding for the Yes on Prop 22 campaign,[26] and promoting the proposed legislation directly to customers when using their app.[27][15] Beyond in-app messaging, Uber and Lyft also conducted extensive social media and television advertising to persuade voters. Such advertisements informed voters that a "no" outcome for the proposition would put many drivers' occupations in jeopardy, among other messages.[28]
Sponsored support
Some of the companies also forced their workers to support and promote the legislation: Uber sent its drivers in-app messages forcing them to click on either "Yes on Prop 22" or "OK", Instacart ordered its workers to place pro-Prop 22 stickers in customers' shopping bags, and DoorDash forced delivery drivers to use bags saying "Yes on 22".[29][30]
Title litigation
The ballot title, written by Attorney GeneralXavier Becerra, is "Exempts App-Based Transportation and Delivery Companies from Providing Employee Benefits to Certain Drivers. Initiative Statute". The Yes on Prop 22 campaign challenged this description as non-neutral in court, but their arguments were rejected by a Sacramento Superior Court judge.[31]
Opposition
The No on Prop 22 campaign was funded by the California Labor Federation,[32][33][34] with support from UC Berkeley Labor Center.[35] The campaign received around $19 million in support, mostly from labor groups.[36] Driver groups Rideshare Drivers United,[37] Gig Workers Rising, We Drive Progress, and Mobile Workers United, spoke out against Prop 22.[23][24] Editorial boards from the New York Times and Los Angeles Times also called on voters to reject Prop 22.[23]
The proposition would add protections specific to app-based workers, different from other independent contractors, but these protections would only apply during the time the worker is "engaged" in fulfilling a specific request and not while the worker is logged in to the app and available to fulfill a request.[38]
All laws created in California by ballot measure are protected from being changed by the state legislature; they can only be changed by another ballot measure. Many ballot initiatives waive this protection, and explicitly state a percentage majority by which they allow the legislature to change the law; commonly, a 2/3 majority is specified. Prop 22 instead designated a 7/8 majority as being required to change it,[14] although this provision as would have applied to collective bargaining was removed by an appeals court ruling in March 2023.[40]
Post passage
Wage effects
A highly contentious literature exists on the topic, with estimates for earnings after Prop-22 (in 2021) ranging from $34.46 per hour to $6.20 per hour.[41]
The $34.46 figure comes from a UCR School of Business Center for Economic Forecasting and Development study paid for by the app companies (Protect App-Based Drivers + Services Coalition - DoorDash, Instacart, Lyft, and Uber) who also supplied one year's worth of their data covering fourth quarter 2020 to third quarter 2021.[42][41] This included 1.37 million drivers who performed at least one ride or delivery during the period, totalling $4.3 billion in driver earnings.[42] The $34.46 per hour number includes tips, but only covers "engaged" time, (time spent driving to a pickup or time driving with a customer/delivery, but not time spent waiting) and did not deduct automobile expenses.[42][41] It varies by region, with large coastal cities providing higher earnings for drivers than rural regions, with (including tips) San Francisco drivers making $39.83/hr, and Bakersfield drivers making $30.22/hr.[42]
The $6.20 per hour figure comes from a study paid for by union groups opposed to the proposition (Rideshare Drivers United) which used data from 21 drivers who voluntarily used a special app to collect their data, yielding information on 3,020 trips between November and December 2021.[43][41][44] They found $26.30 per hour in gross earnings before deducting automobile expenses and the costs of employee benefits which workers would receive if they were employees, which reduced their calculated effective net pay to $6.20 per hour.[43][41][44]
Driver flexibility
Proposition 22 has allowed drivers to continue to have flexibile schedules as independent contractors.[45][46]
Driver benefits
As Uber indicates on their website, the driver must be the primary policyholder order to qualify for the healthcare stipend.[47] It specified that those who have Medicare and Medicaid plans or other insurance paid by employers are not eligible for this benefit. Some have argued that since only "active time" is counted toward the 15 hours / week minimum, with time on different platforms being counted separately, drivers are less likely to be eligible for these benefits.[48] According to polling conducted by Tulchin Research, 86% of surveyed drivers are ineligible for Prop 22 Healthcare Stipend and those eligible are largely unaware of how to do sign up, receiving little information from app-based companies.[49]
Litigation
A lawsuit was filed against the state in January 2021 by the Service Employees International Union over the successful passage of Proposition 22. The lawsuit states that Proposition 22 violates the Constitution of California, as it interferes with workers' access to the state's workers' compensation program and that it "limits the power of elected officials to govern".[50]
On August 20, 2021, Alameda County Superior Court Judge Frank Roesch ruled Proposition 22 unconstitutional because it was not limited to a single subject and because it included a seven-eighths requirement for the legislature to be able to change the initiative which infringed on the legislature's power to set workplace standards. He thereby ruled the entire ballot measure unenforceable. However, the initiative will stay in force while interest groups representing mobile application-based service platforms appeal the ruling.[51][52]
On March 13, 2023, a three judge panel of the California Courts of Appeal (First Appellate District) reversed the lower district court's judgement of 2021, finding that of the three arguments presented, none of them violated the California Constitution. The court stated that Proposition 22 did not violate the Legislature's ability to enact laws (in combination with a voter initiative), did not violate the requirement that an initiative cover "a single subject", and did not violate the Constitutional separation of powers.[53][41][45] The court did sever the proposition's requirement that a seven-eights majority of the legislature was necessary to make changes to worker's options for collective bargaining.[40]
In June 2023, the California Supreme Court agreed to hear an appeal to Proposition 22 and determine its constitutionality.[54]
Impact outside California
Proposition 22 passing has led rideshare companies to pursue legislation and ballot measures about classifying drivers in other states.[46] Rideshare companies have also increased lobbying efforts in Washington, DC to keep drivers as independent contractors at the federal level.[55][16]
Massachusetts
In Massachusetts, Uber and Lyft led a bid to introduce a ballot measure that would expand drivers' rights and maintain their status as independent contractors. The initiative was blocked from reaching the ballot by the state's Supreme Judicial Court in June 2022, which ruled that a provision in the measure which appeared to shield the companies from legal liability for accidents or crime was a "substantively distinct policy decision", while the state's constitution requires all parts of a ballot measure be related.[56]
Washington
In April 2022, Washington state legislators passed, and the governor signed a bill specifying that ride-share drivers are independent contractors, while also giving them new protections and benefits.[57][58][46] The law requires that drivers receive a minimum amount per mile ($1.17), per minute ($0.34), and per ride ($3), as well as giving them one hour of paid sick leave per 40 hours worked.[57][58] It also created a way for drivers to dispute "deactivations", (essentially terminations or firings) which are when the app company stops allowing them to find passengers through the app.[57][58]
^ abcdefHepler, Lauren (2020-08-21). "Uber, Lyft and why California's war over gig work is just beginning". CalMatters. Archived from the original on 2020-08-23. At the same time, Uber CEO Dara Khosrowshahi is pleading his case in Washington, calling in a New York Times op-ed this week for a "third way" for gig workers, between full-time employment benefits and contract work with "almost no safety net." ... This month, Khosrowshahi's op-ed called for ongoing "benefits funds which give workers cash that they can use for the benefits they want, like health insurance or paid time off," rather than employer-sponsored health care or state-mandated paid leave.
^ abSiddiqui, Faiz (2020-10-26). "Uber and gig companies spend nearly $200 million to knock down an employment law they don't like — and it might work". The Washington Post. Uber says 91 percent of its drivers across the country work fewer than 40 hours per week. Uber CEO Dara Khosrowshahi said in a blog post this week that if the company were forced to make all drivers across the country employees, for example, it could only support 260,000 full-time roles. That compares to 1.2 million active drivers the company was hosting on its app before the coronavirus pandemic.
^ abcdMarshall, Arian (31 October 2019). "Uber and Lyft Fight a Law They Say Doesn't Apply to Them - The ride-hail companies are backing a ballot measure to overturn a California law intended to transform gig-economy workers from contractors to employees". Wired. Archived from the original on 2019-11-06. Retrieved 2020-10-14. The companies and their supporters are pitching the initiative as a "compromise" that would create a third employment classification requiring Uber, Lyft, and their ilk to give drivers more perks than the average independent contractor but wouldn't entitle workers to the full benefits of an employee. If it's approved by state voters, the initiative would require the companies to pay their still-independent contractors a minimum wage and vehicle maintenance costs, cover their auto insurance costs, and grant them a health care stipend. It would create a sexual harassment policy for drivers and riders and would require the companies to investigate complaints. It would also create mandatory safety training for any app-based drivers.
^ abDickey, Megan Rose (2020-08-14). "Human Capital: A timeline of Uber and Lyft's fight against AB 5 and Pinterest's fall from grace". TechCrunch. Archived from the original on 2020-08-17. November 2020: Californians will vote on Prop 22, a ballot measure majorly funded by Uber, Lyft and DoorDash. Prop 22 aims to keep gig workers classified as independent contractors. The measure, if passed, would make drivers and delivery workers for said companies exempt from a new state law that classifies them as W-2 employees. The ballot measure looks to implement an earnings guarantee of at least 120% of minimum wage while on the job, 30 cents per mile for expenses, a healthcare stipend, occupational accident insurance for on-the-job injuries, protection against discrimination and sexual harassment and automobile accident and liability insurance.
^ ab"Newsom signs bill rewriting California employment law, limiting use of independent contractors". Los Angeles Times. 2019-09-18. Retrieved 2020-10-14. Under AB 5, which will take effect Jan. 1, Californians will be considered to be employees of a business unless an employer can show the work they perform meets a detailed set of criteria established by a California Supreme Court ruling last year. Under those criteria, a worker is an employee if his or her job forms part of a company's core business, if the bosses direct the way the work is done or if the worker has not established an independent trade or business.
^ abcHussain, Suhauna (2020-10-19). "What Prop. 22's defeat would mean for Uber and Lyft — and drivers". Los Angeles Times. Archived from the original on 2020-10-22. Proposition 22's text carries language that aims to block further legislative action targeted at gig companies. If passed, amending it would require a seven-eighths supermajority of the Legislature — a daunting hurdle. In California, a law created by ballot measure can be changed only by another ballot measure, unless the original measure specifies otherwise. Because it's a hassle to push through ballot measures, initiatives will frequently waive this protection and provide opportunity for the measure to be amended by the Legislature. A two-thirds majority vote is a common benchmark initiatives use. A seven-eighths majority requirement is unheard of.
^ abcdWhite, Jeremy (2020-11-05). "Uber CEO sees California ballot initiative as a model for other states". Politico. Uber CEO Dara Khosrowshahi said Thursday that his tech coalition's ballot win in California this week should serve as a template for regulating the gig economy in other states and nations. ... Courts were poised to force gig companies to treat drivers as full-time employees, and the companies threatened to stop doing business in the car-dependent state. ... Khosrowshahi and other tech executives have long advocated for an employment model that straddles the employee-contractor dichotomy by letting workers set their own hours but offering them portable benefits.
^Morath, Eric (2021-05-05). "Biden Blocks Trump-Era Gig-Worker Rule". Wall Street Journal. Uber spokesman Noah Edwardsen on Wednesday said the company views the current federal employment system as outdated. Workers must choose to be an employee with more benefits and less flexibility, or an independent contractor with more flexibility and limited protections, the spokesman said. "Uber believes that we can combine the best of both worlds by offering independent work opportunities to the hundreds of thousands of workers that use the Uber platform while also providing these workers with meaningful benefits," he said.
^ abcHepler, Lauren (2020-10-06). "What to know about gig worker pay before voting on Prop. 22". CalMatters. In California, the Legislative Analyst's Office advises Prop. 22 voters that "most drivers probably make between $11 and $16 per hour" after waiting time and expenses. ... In California, Uber has forecasted that fares would rise 25%–111% in different areas of the state if the company was forced to comply with AB 5, and that the number of active drivers could fall by three-quarters.
^Bellon, Tina (2020-08-21). "Factbox: What's at stake in California's November gig worker ballot measure". Reuters. The companies say roughly 80% of all drivers work less than 20 hours per week. Being forced to reclassify workers as employees would threaten the companies' business models and force them to reduce driver numbers by up to 90%.
^"Yes on Prop 22". Save App-Based Jobs & Services. Retrieved 2020-10-14. Paid for by Yes on 22 [...] Committee major funding from Uber Technologies, Lyft, and DoorDash.
^ abcdefGedye, Grace (2023-03-13). "Court upholds California Prop. 22 in big win for gig firms like Lyft and Uber". CalMatters. Research on drivers' wages after Prop. 22 varies, depending in part on how working hours and expenses are calculated. A study paid for by the coalition including Uber and Lyft and conducted by researchers at UC Riverside found that in late 2021, drivers for DoorDash, Instacart, Lyft, and Uber earned $34.46 in gross pay per hour of "engaged" time — the time between accepting a ride or delivery and dropping the order or rider. That was up from $27.34 in late 2019, before the measure passed. Those wages don't account for time workers spend waiting between rides, or costs like fuel and car maintenance and insurance. But a study of Uber and Lyft drivers conducted by National Equity Atlas, in partnership with Rideshare Drivers United, which opposed Prop 22., found that drivers on average earned $26.30 in gross wages per hour in late 2021. After subtracting the cost of employee benefits not provided to gig workers — including reimbursement for total miles driven and employer contributions to programs including Social Security, Medicare, unemployment insurance and paid sick time — that study computed the net wages at $6.20 per hour.
^ abcdOsman, Taner; Maury-Holmes, Samuel (2022-02-01). "AN ANALYSIS OF APP-BASED DRIVERS IN CALIFORNIA"(PDF). UCR School of Business Center for Economic Forecasting and Development. Retrieved 2023-03-16. Company data are provided by DoorDash, Instacart, Lyft, and Uber, covering the period from third-quarter 2019 to third-quarter 2021. The Center for Economic Forecasting had independent access to this data and full discretion in analyzing the provided data. ... There is variation in driver earnings by region. Earnings are higher in the larger coastal cities, while drivers in more rural cities earn relatively less.
^ abMarshall, Aarian. "California Voted for Cheaper Uber Rides. It May Have Hurt Drivers". Wired. ISSN1059-1028. Retrieved 2023-03-15. "We had a lot of challenges in collecting good data," says Eliza McCullough, an associate with PolicyLink and a coauthor of the report. To collect it, researchers asked 55 drivers to use another app called Driver's Seat Cooperative to collect data on all their rideshare trips between November and mid-December 2021. The sample was trimmed down to 21 drivers for the pay analysis, because of challenges related to data collection. The result was a relatively small dataset of 3,020 trips in total. Drivers made a median of $26.30 per hour in earnings, tips, and bonuses, the researchers found. But driving looked less well compensated when they subtracted some of the costs associated with being self-employed that might otherwise be covered by an employer, such as the cost of owning or leasing and operating a vehicle, taxes, unemployment insurance, paid sick time, and paid rest time. The result was an effective hourly wage less than half of California's minimum wage.
^ abSuhauna Hussain, Suhauna Hussain (2023-03-13). "California appeals court reverses most of ruling deeming Prop. 22 invalid". Los Angeles Times. For hundreds of thousands of drivers, Proposition 22 preserved the flexible schedules associated with remaining an independent contractor but took away protections granted by a 2019 law, AB 5, requiring gig workers across many industries to be classified as employees with stronger benefits such as a minimum wage, overtime and workers' compensation in case of injury.
^Browning, Kellen (2022-06-14). "Massachusetts Court Throws Out Gig Worker Ballot Measure". The New York Times. ISSN0362-4331. Retrieved 2023-03-15. The ballot measure contained two "substantively distinct policy decisions, one of which is buried in obscure language" violating the State Constitution, which requires all parts of a ballot measure to be related, the Massachusetts Supreme Judicial Court wrote in its ruling. The court took issue with a provision of the measure that said drivers were "not an employee or agent" of a gig company, because it appeared to be an attempt to shield Uber and Lyft from liability in the case of an accident or a crime. That provision was unrelated to the rest of the proposal, which was about the benefits drivers would or would not receive as independent contractors, according to the seven-judge panel.
^ abcDress, Brad (2022-04-01). "Washington passes first-ever state law creating minimum pay for ride-hailing companies". The Hill. The companies have been opposed to establishing a minimum wage for their workers because it would change how the service works, arguing that gig economy workers want flexibility and often drive as a side job. California in 2019 passed a law reclassifying gig workers as employees, but ride-hailing and other delivery companies backed a 2020 ballot measure that exempted drivers from the law.
