Prop 22 & AB-5: Simple Explanation and What It Means for the Gig Economy Future

What Is Prop 22/AB-5?

The AB-5, or California’s Assembly Bill 5, put a specific definition of gig worker in the driving and hauling industry, classifying drivers as either employees or independent contractors.

Contractors, by definition, should have the following criteria according to the bill’s “ABC Test”:

1. The contractor is free from the control and direction of the employer regarding their performance at work.
2. The contractor performs work and duties that are typically outside the employer’s field of business.
3. The contractor has an independent work or trade relating to the nature of the work they perform for the employer.

The passing of AB-5 comes as a win for gig workers. The reason is that many companies have been replacing their workforce with contractors.

So, instead of hiring full-time employees, businesses expected independent gig workers to perform the same duties without the salary, insurance, or benefits of a full-time worker.

Yet, this puts ridesharing and delivery drivers at a disadvantage since they can no longer possess the freedom of this gig work, nor leave their full-time positions for Uber Eats. Well, that’s where California Prop 22 comes in handy.

Prop 22 is a proposition made to exempt delivery and app-based drivers from California’s Assembly Bill 5 rules. Yet, the California proposition still offered gig drivers alternative benefits.

Did Prop 22 Pass?

In November 2022, Prop 22 officially passed in California. Gig-focused companies can now hire independent contractors without having to pass the second rule of AB-5.

Simply put, delivery and rideshare companies, such as Lyft, Uber, and DoorDash, that are based in California can hire independent, app-based drivers.

Yet, each gig company has to comply with the benefits proposed by Prop 22, such as a minimum wage and a health insurance stipend for workers averaging over 15 hours per week.

Main Players Involved With This Legislation

Prop 22 might seem like a small change if you’re only hearing about it. Yet, this legislation completely changed the gig economy as well as altered the definition of gig work.

Naturally, such a drastic change didn’t come without opposition. So, here are the two main parties involved with California Prop 22:

Who Were the Main Supporters of Prop 22?

Gig companies and corporations like Uber, Lyft, Postmates, and DoorDash, were among the first supporters of proposition 22.

This is only natural since the Silicon Valley giants built their business on gig workers and hiring independent contractors.

In fact, the whole purpose of app-based drivers is that anyone can make money during their free time, without being confined to the regular working hours of full-time employees.

For this reason, AB-5 came as a major disadvantage for gig companies and many contingent workers working for these corporations. So, rallying for Prop 22 was their solution.

Who Were the Main Opponents of Prop 22?

On the other hand, independent contractors found gig corporations to utilize their time and energy without sufficient compensation.

These large businesses set their rules regarding gig contractors, leaving little room for negotiation and negating the freedom that usually accompanies gig work.

That’s not all. Since app-based companies are expanding every day, they’re monopolizing the industry. So, gig workers have no choice but to join the businesses.

For this reason, hundreds of thousands of drivers and members of labor groups opposed the passing of Prop 22. This includes Rideshare Drivers United. The New York Times and Los Angeles Times also urged voters to reject the proposition.

How Much Was Spent on Lobbying Efforts for Prop 22?

Prop 22 was the most expensive ballot measure campaign in the history of California. After all, the legislation involved the biggest players in Silicon Valley.

The business giants spent over $200 million lobbying in favor of Prop 22. This gave gig companies an edge over independent contractors.

That’s not all. Every gig company used its massive power to reach thousands of California natives, urging them to vote on Election Day.

These notifications were a huge advantage for the businesses. In fact, a quarter of the voters stated that they were undecided only a week before the election. However, Uber and other rideshare companies were able to define the issue in their favor.

For this reason, many objectors of proposition 22 believe that the only reason the legislation passed was because of its large financial backing. On the other hand, labor groups and gig workers didn’t stand a chance.

Pros and Cons of Prop 22

Prop 22 came with its fair share of controversy. Naturally, it’s hard to form an opinion on such an issue. Still, the legislation had its advantages and drawbacks.

Pros of Prop 22

Here are all the reasons why California Prop 22 might be beneficial to app-based workers:

• Prop 22 increased the hourly wage to $16.8, which is well above the minimum pay under fair labor laws. Yet, this is only a floor, as a rideshare driver’s actual earnings often exceed this figure.
• The proposition includes a healthcare stipend, where qualified drivers can receive about $400 monthly in health benefits.
• It allows drivers to remain independent while still having a steady stream of income.
• The California proposition acts as a compromise, allowing both gig economy companies and independent contractors to benefit.

Cons of Prop 22

App-based workers might find Prop 22 a disadvantage for the following reasons:

• App-based drivers still don’t get compensation for the time they spend waiting for ride requests and driving to the pickup location.
• Large corporations such as Uber and Lyft make billions of dollars through the labor of gig workers, so they can definitely spare more benefits and fairer pay.
• Due to the strict rules of ridesharing and delivery businesses, app-based drivers no longer have the financial security or freedom they had as independent contractors.
• Rideshare drivers neither have the employment rights of full-time employees, such as unemployment insurance, nor the actual earnings of independent contractors.

Where Do Gig Workers Stand as a Result?

Gig workers across numerous industries aren’t affected by Prop 22. Even if you’re an app-based worker specializing in anything other than ridesharing and delivery, you’re still working under AB-5 laws.

In contrast, rideshare drivers aren’t regarded as employees of companies. Though app-based companies offer drivers financial compensation, and health care, and protect them against workplace discrimination, drivers are still not paid for canceled rides or the time they spend waiting.

Keep in mind that while rideshare companies are increasing their lobbying efforts in other states, Prop 22 is a law in only California.

Is Anybody Challenging the Outcome of Prop 22?

Many parties tried to appeal Prop 22. This includes a California superior judge in 2022. However, since this is a law created by a ballot measure, only another ballot measure can change it.

That said, the California Supreme Court finally granted an appeal made by SEIU in 2023. The court will hear the appeal later this year and might give a ruling by early 2024.

Frequently Asked Questions

Wrapping Up

There’s no denying that Prop 22 came at an advantage for rideshare companies and Silicon Valley giants. Yet, while the law doesn’t guarantee app-based drivers all of their rights, it also grants them a couple of benefits.

The reason is that Prop 22 ensures that rideshare drivers get 120% of the minimum wage, as well as health benefits and medical insurance. Unfortunately, only drivers who work 15 hours a week or more qualify for these benefits.

Businesses also received plenty of backlash for the amount of money spent on lobbying for Prop 22, which could’ve gone to deserving gig workers. Rideshare companies also used their wide influence to get California voters to support the proposition. For this reason, many groups are looking to appeal Prop 22.

If you’re still curious about Prop 22, comment below to find out the answers.