California’s worker landscape has significantly changed in the age of AB5. Many workers have forcibly been reclassified as independent contractors to stay compliant with the new standard set forth in Assembly Bill 5, but this has just led to a rise in misclassification suits for many employers. We don’t expect this increase to stop any time soon, especially in light of the recent ruling deeming Prop 22 as unconstitutional.

What is Proposition 22?

Proposition 22 reclassifies app-based drivers as independent contractors instead of employees, providing them with fewer labor protections under state law. Under this law, app-based drivers are defined as workers who:

1. Provide delivery services on an on-demand basis through a business’s online-enabled application or platform; or
2. Use a personal vehicle to provide pre-arranged transportation services for compensation via a business’s online-enabled application or platform.

According to the law description, Proposition 22 claims to protect independent contractors by instituting minimum wage, offering mileage compensation, capping work hours, prohibiting discrimination and harassment, and requiring companies to provide healthcare and accident insurance to gig workers.

Leading up to the November 2020 elections, rideshare companies spent approximately $200 million to propagandize this law initiative, which ultimately paid off with 58% of California voters approving the measure. However, many have recently expressed that they still have not reaped the benefits promised by this law, especially since Prop 22 does not cover workers’ compensation, overtime laws, sick leaves, paid family leaves, or unemployment insurance. As such, the Service Employees International Union (SEIU) recently sued the state government in the California Supreme Court and sought a writ of mandate to invalidate Prop 22.

Proposition 22 Ruled Unconstitutional

On August 20, 2021, Alameda County Superior Court Judge, Frank Roesch, ruled that Proposition 22 was unconstitutional and that the measure as a whole was unenforceable after a lawsuit was brought forth by three drivers and the SEIU. According to Roesch, one of the issues with Proposition 22 was regarding the language used – which was aimed at preventing gig workers from unionizing. Prop 22 also violated the constitutional provision that requires laws and initiatives to be limited to a single subject. However, the main problem drivers had with Prop 22 was that the benefits offered to entice support for Prop 22 were difficult to access.

Although Proposition 22 was ruled unconstitutional, many large rideshare companies are looking to appeal this decision and are even pursuing similar legislation in other parts of America. For example, in Massachusetts, a new ballot proposal was brought into light that could allow in-state voters to decide whether gig workers should be considered independent contractors.

Since this fight is far from over, employers in the gig economy should be more proactive in making information available to workers so as to decrease potential lawsuits and improve worker satisfaction. Moving forward, they should establish policies that correct the problems that gig workers face before it gets taken into court.

Hackler Flynn & Associates Can Help with Prop 22 and AB5 Compliance

In light of the recent ruling on Proposition 22, it is essential to ensure the proper classification of workers in the rideshare industry. If not properly classified, it can lead to huge misclassification suits with large liabilities. Employers in the rideshare industry should engage in legal counsel to make sure they are compliant with the current worker classification rulings and legislations. If you need help conducting an independent contractor analysis, please feel free to contact Hackler Flynn & Associates.

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