California Voters to Weigh In on Gig Drivers’ Employment Status


Woman Driving Car for Rideshare

Should drivers for app-based delivery and ride-hailing services continue to be classified as independent contractors? California voters will get to answer this question in November because of a ballot initiative supported by Uber, Lyft and several grocery and food delivery services.

California's  AB 5—a controversial new independent-contractor test that took effect Jan. 1—aims to provide workplace protections to more people by requiring businesses to reclassify many gig workers as employees. Employees are entitled to a minimum wage, overtime pay, unemployment insurance and other benefits that are not generally provided to independent contractors.

Several professional associations, on-demand businesses and workers are trying to halt its application to their respective industries through lawsuits, legislation, and most recently, the ballot initiative for app-based drivers. The main complaint is that the new law hurts independent workers who use their own equipment and set their own schedules.

We've rounded up articles and resources from SHRM Online and other trusted media outlets on the news.

App-Based Driver Classification

The ballot initiative asks California voters whether app-based drivers should be classified as independent contractors rather than employees, but it doesn't impact how AB 5 is applied to workers in other occupations. Businesses that hire app-based drivers include ride-hailing services Uber and Lyft, and take-out food delivery service DoorDash. App-based drivers are defined as workers who either:

  • Provide delivery services on an on-demand basis through a business's online-enabled application or platform.
  • Use a personal vehicle to provide prearranged transportation services for compensation through a business's online-enabled application or platform.

The ballot measure would also ensure app-based drivers receive certain benefits, including:

  • Minimum net earnings of 120 percent of the state's or locality's minimum wage and 30 cents per mile.
  • Healthcare subsidies.
  • Occupational accident insurance.
  • Accidental death insurance.

Under the measure, companies would have to develop anti-discrimination and sexual harassment policies, and drivers would be limited to working 12 hours during a 24-hour period.


Balancing Flexibility and Employment Protections

The initiative received more than the 623,212 verified signatures that are needed to qualify for the Nov. 3 ballot. If the initiative is successful, app-based drivers in California would remain independent contractors and have access to some benefits and training, though they wouldn't qualify for paid leave or unemployment benefits. Proponents of the initiative say it would allow drivers to maintain the flexibility that comes with gig work. Opponents say it would pave the way for more technology companies to circumvent labor laws.

(Bloomberg Law)

The 'ABC Test'

Effective Jan. 1, AB 5 codified a 2018 California Supreme Court decision, Dynamex Operations West, Inc. vs. Superior Court of Los Angeles, which created a three-pronged test, called the "ABC test," to determine whether a worker should be classified as an employee or independent contractor.

The test used prior to the ABC test was a multifactor analysis that primarily focused on who exerted control over the work. But under the ABC test, all three of the following factors must be met for a worker to be properly classified as an independent contractor:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • The worker performs tasks that are outside the usual course of the hiring entity's business.
  • The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

The Dynamex decision expanded the definition of "employee" under the California Wage Orders and placed the burden on companies to prove that independent contractors are properly classified. Though this decision only applied to wage orders, AB 5 extends the ABC test to all provisions of the California Labor Code and Unemployment Insurance Code unless another definition of "employee" is provided.

(SHRM Online)

Coronavirus Fuels AB 5 Debate

Coronavirus concerns have raised questions about California's strict independent-contractor test and whether it should be amended. Although gig workers and other independent contractors have access to some federal emergency relief, they generally aren't entitled to unemployment compensation. Even before COVID‑19 hit, legislators, union leaders, business groups and other key stakeholders were discussing potential amendments to AB 5.

(SHRM Online)

Uber and Lyft Face Employee Misclassification Lawsuit

For now, the ABC test applies to app-based drivers, and California officials are suing Uber and Lyft for allegedly misclassifying their drivers as independent contractors. California Attorney General Xavier Becerra is seeking millions of dollars in back pay for allegedly misclassified drivers. "California has ground rules with rights and protections for workers and their employers," Becerra said. "We intend to make sure that Uber and Lyft play by the rules." 

(California Department of Justice)


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