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Here’s what Prop 22 means for the gig economy


A California state appeals court ruling will allow app-based ride-sharing and delivery companies to continue treating drivers as independent contractors, reinstating Proposition 22, a 2020 state law that was struck down in 2021 by a court from a lower level.

Monday’s ruling says companies like Uber, Lyft and Doordash don’t have to consider the workers employees, even though the companies can’t prevent independent drivers from joining a union and collective bargaining for better working conditions.

The decision is generally seen as a defeat for workers and unions, as it strips them of protections and benefits guaranteed to regular employees. The Service Employees International Union (SEIU) is expected to appeal the decision to the California Supreme Court.

Key findings

  • Following Monday’s California appeals court ruling, app-based ride-sharing and delivery service drivers will continue to be treated as independent contractors under Proposition 22.
  • Drivers will not be prevented from joining a union and collective bargaining.
  • The Service Employees International Union (SEIU) is expected to appeal the decision to the California State Supreme Court.
  • Affected gig workers would not fall under SB 5, which imposes a test that classifies many gig workers as employees and grants them additional benefits and rights.

What the decision means for gig workers

The battle for benefits in California began with the passage of House Bill 5 (AB 5) in 2019, which set new standards for determining whether a worker would be considered an employee or an independent contractor.

Under this week’s decision, the status of gig workers other than app-based ride-sharing and delivery service drivers does not change. They would still fall under AB 5, which applies a three-part test (ABC) to determine whether a worker is an employee or an independent contractor.

This test assumes that the worker is an employee unless the company can prove all of the following:

  • The worker is free to perform services without the control or direction of the company.
  • The employee performs work tasks that are outside of the company’s normal course of business.
  • The worker is usually engaged in an independently established trade, profession or business of the same nature as that involved in the work performed.

Although AB 5 is a 2019 law, it is far from settled. It faces legal challenges, including a motion by the California Trucking Association and the Independent Owner-Operator Association seeking a preliminary injunction against the application of AB 5 to the trucking industry.

As for drivers for Uber, Lyft, Doordash and other similar companies, they will fall under Prop 22 for now, including its alternative benefits, but without the ability to be considered employees under AB 5’s ABC test.

This means that, unlike covered gig workers, they will not be eligible for workers’ compensation, paid sick and family leave, unemployment insurance, and certain government payment obligations, including payroll taxes, social security, and insurance for disability.

Bill 5 vs. Proposition 22

Proposition 22 was created and promoted by ride-sharing and delivery companies to exempt their drivers from AB 5. Proposition 22 passed in November 2020 and included “alternative benefits” for drivers, such as a guaranteed minimum wage and health insurance subsidies for drivers who averaged 25 hours of work per week.

Three drivers and the Service Employees International Union sued, arguing that Proposition 22 was illegal because it limited the Legislature’s power to pass laws regarding workers’ compensation programs.

In 2021, a lower court judge agreed and ruled that companies like Uber and Lyft were not exempt from AB 5. A state appeals court ruling on Monday overturned that decision, allowing the companies to treat their drivers as independent contractors.

Uberization of the workforce vs. ABC test

One of the main reasons all eyes are on California after the Prop 22 restoration is what critics call the “Uberization” of the workforce. The term first became popular in France to describe a service-based economy as opposed to a manufacturing-based one.

In California, the term is used to describe the replacement of employed workers with independent contractors. There is concern that “what happens in California won’t stay in California,” but has spread to include the passage of Prop 22-like laws in state legislatures across the country. Opponents worry the spread will lead companies to eliminate high-paid employees in favor of cheaper gig workers.

The corporate perspective is different. If, instead of laws allowing companies to hire independent contractors, legislatures pass laws like AB 5 that force them to treat these workers as much more expensive employees, it could dramatically increase the cost of doing business.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.