Prop 22 Passed in California. Here’s What It Means for Gig Drivers

A ride share drivers greets the guests in his car before taking off. Prop 22 passed in California, exempting Uber, Lyft and other driving-related gig companies from a state labor law that would otherwise force them to classify their gig workers as W-2 employees.
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The future of Uber, Lyft, DoorDash and similar gig companies was on the ballot in California, where voters approved a proposition that keeps app-based drivers classified as independent contractors.

That designation is crucial for the business models of companies that rely on a network of hundreds of thousands of independently contracted gig workers. But the measure, known as Prop 22, also provides rideshare and delivery drivers with some new benefits, including a minimum earnings guarantee.

Uber, Lyft and other similar gig companies were in favor of the measure and spent more than $200 million on pro-Prop 22 efforts.

But Alexandrea Ravenelle, a gig economy researcher and author of “Hustle and Gig: Struggling and Surviving in the Sharing Economy,” told The Penny Hoarder that she was “disappointed for the drivers and for the working public.”

“Uber and Lyft spent $200 million to avoid having to treat their workers as employees,“ she said. “Workers in other states should expect that this change may also have implications for labor battles in other locales in the future.”

Prop 22 is no doubt contentious. But what exactly is it and how will it affect you as a driver?

A Primer on Proposition 22

At the heart of the debate around Prop 22 was whether app-based gig drivers in California should be considered W-2 employees or 1099 independent contractors.

W-2 employees are eligible for employer-sponsored health insurance if they work at least 30 hours per week; workers compensation for on-the-job injuries; contributions into Social Security and Unemployment Insurance; and the ability to take sick or caregiver leave. Those are all expenses borne by employers — which the Ubers of the world want to avoid.

The gig companies largely framed Prop 22 as: 1099 independent contractor status means flexibility, and W-2 employee work means rigidity.

Ravenelle said that framing created a “false dichotomy,” and that shouldn’t have to be an either-or scenario.

“Uber, Lyft and Doordash… marketed Prop 22 by claiming that being an independent contractor is what all workers want and what is best for workers,” she said.

Why were Uber and Lyft ordered to reclassify their workers in the first place? A new California labor law called AB 5, requiring companies that control when or how their independent contractors work to reclassify them as W-2 employees. When Uber and Lyft didn’t comply with the new law, the state sued the two rideshare companies.

The passage of Prop 22 suggests the end of the legal battle in California. AB 5 is still in effect, however. It applies to much more than these handful of gig companies. Only “app-based transportation and delivery” companies are now exempt from the labor law. It’s unclear how other gig companies that aren’t specifically transportation- or delivery-related will be affected.

Beside exempting ride-share and delivery companies from reclassifying their workers, Prop 22 also provides drivers with some additional benefits — a “third way” as the companies sometimes call it, one that is somewhere in between 1099 and W-2 employment.

What Is Changing for Ride-Share and Delivery Drivers Under Prop 22

Your independent contractor status is staying the same, but you will see some new benefits.

The following benefits enshrined by Prop 22 are based on your “engaged time,” which is the amount of time you spend logged into the app and en route with a passenger or delivery:

  • An “earnings guarantee.” This provision guarantees you 120% of your local minimum wage based on “engaged time” on the app not real time — plus 30 cents per “engaged” mile. Tips are not factored into this equation. They’re extra.
  • A health care subsidy. If you drive an average 25 hours per week of “engaged time” per quarter, you will qualify for a quarterly subsidy toward your Covered California premium. Drive between 15 and 25 hours of engaged time per week, and you’ll be eligible for a 50% or greater health-care subsidy.
  • Occupational accident insurance. This insurance program will cover medical expenses and lost income related to injuries that occurred while you were logged into the app. It covers “up to at least” $1 million for medical expenses and 66% of your average weekly earnings.

While these benefits were not previously available prior to Prop 22, critics say that they fall short.

“The benefits contained in the initiative pale in comparison to what workers are entitled to under state law,” researchers from the National Employment Law Project and the Partnership for Working Families wrote in a report on Prop 22.

W-2 benefits would have ostensibly been extended to drivers had Prop 22 failed.

The gig companies have not yet released a timeline of when their new benefits will roll out. In an email to drivers, Uber said they will be available “as soon as possible.”

Adam Hardy is a staff writer at The Penny Hoarder. He covers the gig economy, entrepreneurship and unique ways to make money. Read his ​latest articles here, or say hi on Twitter @hardyjournalism.