The Catastrophic and Cascading Effects of California Proposition 22 on Gig Workers’ Rights

As the dust continues to settle after Joe Biden’s election as the next President of the United States, the passing of a controversial ballot measure in California – Proposition 22 – has flown somewhat under the radar, despite its potential to reshape the landscape of wage-and-hour law for gig economy workers not only in California, but across the country.  Proposition 22, or “the App-Based Drivers as Contractors and Labor Policies Initiative,” asked California voters to define app-based rideshare and delivery drivers as independent contractors, as opposed to employees, paving the way for the adoption of labor and wage-and-hour policies specific to those drivers and the companies that hire them.  Californians voted overwhelmingly in favor of the measure, which passed by a 17.2% margin, amounting to a difference of nearly 3 million votes

Proposition 22 is a direct response from rideshare and delivery companies to the California Supreme Court’s decision in Dynamex v. Lee (“Dynamex”) and the passing of Assembly Bill (“A.B.”) 5, both of which significantly expanded the definition of “employees” who are entitled to various wage-and-hour protections—most notably, the rights to receive overtime and be paid for all hours worked.  In Dynamex, the California Supreme Court applied a presumption that workers are employees, thereby shifting the burden of proof to employers contesting a worker’s status.  Under Dynamex, employers can overcome this presumption only by proving that the workers at issue:  (i) are free from the employer’s control over the performance of their work; (ii) perform work that falls outside of the employer’s usual course of business; and (iii) customarily perform the same kind of work they perform for the employer in other contexts.  Less than 18 months after Dynamex, the State of California codified the decision through A.B. 5, seemingly making the additional protections afforded to gig workers iron clad.

Almost immediately after A.B. 5 became law, employers began challenging the statute in the courts, with little success.  Having failed to prevent enforcement of A.B. 5, Uber, Lyft, DoorDash, and Instacart poured more than $200 million into the controversial “Yes on 22” campaign, making it the costliest ballot measure in California history.  The rideshare and delivery companies’ efforts to pass the measure, while an unequivocal success, were controversial to say the least.  Most notably, roughly one month before the election, many Southern California voters received political mailers masquerading as progressive voter guides and endorsing Proposition 22.  The fine print on one mailer said it was prepared by the “Feel the Bern, Progressive Voter Guide,” which is not an actual organization.  Neither are the “Council of Concerned Women Voters Guide” nor the “Our Voice, Latino Voter Guide,” whose mailers made the same endorsements.  Senator Bernie Sanders denounced the mailer as “a lie” and called on Uber and Lyft to publicly denounce the apparent disinformation campaign.

Deceptive tactics aside, there is no denying that the “Yes on 22” campaign worked.  As a result, California gig workers are now entitled to be paid only for “engaged time,” defined as the time between receiving a request and dropping off the passenger or delivery item,  rather than for all hours worked, as California and federal statutes require for all employees – a group to which California gig workers no longer belong.  To be sure, this is just one of myriad wage-and-hour protections California gig workers lost on November 4, 2020. 

What is more, opponents of workers’ rights have been emboldened by the result of Prop 22 – which U.S. Labor Secretary Eugene Scalia called “a strong warning to progressives” – and plan to take the show on the road.  Indeed, Uber and others are reportedly planning similar ballot measures in states like New Jersey, where state regulators have challenge their wage practices, as well as Massachusetts, New York, and Pennsylvania, where regulators and courts have similarly rejected the dubious claim that gig workers are independent contractors who run their own businesses.

These reports, as well as the fact that Proposition 22 can be overturned only by an exceedingly unlikely “seven-eighths” vote of the State Legislature, spell trouble for gig workers in all states that have previously afforded them protection.

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Faruqi & Faruqi, LLP focuses on complex civil litigation, including securities, antitrust, wage and hour, personal injury and consumer class actions as well as shareholder derivative and merger and transactional litigation. The firm is headquartered in New York, and maintains offices in California, Delaware, Georgia and Pennsylvania.

Since its founding in 1995, Faruqi & Faruqi, LLP has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, direct purchasers, consumers and employees.

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About Alex Hartzband

Alex Hartzband's practice is focused on employment litigation. Alex is a senior associate in the firm's New York office.

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