California’s Gig Employee Regulation: What to Know
Encouraged by a California election victory that preserved their drivers’ independence last year, gig economy companies like Uber and Lyft have in recent months accelerated the push for a so-called “third type of work,” a classification of independent gig workers who have restricted benefits without attaining employee status.
But that plan was turned on its head on Friday night by a California judge who ruled that the electoral initiative backed by Uber, Lyft, DoorDash and other so-called gig economy companies is against the state’s constitution. It has been a potential setback for companies and a victory for union organizers and drivers who argue they are being treated unfairly.
Here is an explanation for this long smoldering fight and what happens next:
Wasn’t that problem solved in California?
Uber and Lyft have long stated that their drivers are independent contractors, which enables companies to avoid the cost of health insurance, unemployment insurance, sick leave, and other work benefits.
However, some state lawmakers, federal officials, and legal experts have claimed that drivers are statutory employees and that Uber and other gig companies owe them the full protection that comes with employment.
In 2019, California lawmakers passed law requiring companies like Uber to hire their drivers. The attorney general sued Uber and Lyft for enforcing the law, and the companies responded by threatening to leave the state.
Uber, Lyft and DoorDash invested more than $ 200 million in an electoral measure known as Proposition 22 that would allow drivers to remain independent contractors while the companies offered them limited benefits. Prop. 22 was adopted in November with around 59 percent of the vote.
In January a coalition of hail truck drivers and trade unions sued on the grounds that Prop. 22 was unconstitutional. A month later, the California Supreme Court declined to hear the case, which appeared to put an end to the challenge. But the group resubmitted their application to a lower court, which resulted in a verdict last week.
Why did the judge find Prop. 22 unconstitutional?
The decision of Judge Frank Roesch of the California Superior Court in Alameda County had three main determinations.
The first was that Prop. 22 removed gig workers from the pool of employees who would be entitled to workers’ compensation in the event of injury or other workplace incident. But the state legislature has the right under the California constitution to set and control employee compensation.
Judge Roesch wrote in his decision that Prop. 22 “restricts the power of a future legislator to define app-based drivers as employees subject to industrial accident law” and is therefore unconstitutional.
Second, Prop. 22 contained several unusual provisions that were intended to prevent the legislature from making substantial changes to the law.
The move requires lawmakers to get a seven-eighth majority to make changes to the law, a super majority that is considered unreachable. It also requires that all changes be “compatible” with Prop. 22, thereby preventing the legislature from drastically changing or reversing the law.
If the independent status of drivers were to be changed, the rest of Prop. 22 would also be invalid. So if the drivers were declared employees, Uber and Lyft could waive the higher wages, private accident insurance and other benefits under sentence 22.
Since the workers’ compensation issue could not be separated from the rest of Prop. 22, Judge Roesch wrote that “the entirety of Proposition 22” could not be enforced.
Finally, the judge also objected to a clause in Prop. 22 that prevents gig workers from unionizing. Prop. 22 states that any future law that gives an organization the right to bargain collectively for driver benefits, compensation or working conditions will be viewed as an amendment and will be subject to the majority rule of seven-eighths. Judge Roesch considered this provision to be unconstitutional, as a collective bargaining law was to be viewed as “independent legislation”.
Who intervened to block Prop. 22?
In addition to the Service Employees International Union, three hail drivers and one driver are involved in the lawsuit.
“We’ll continue to highlight how gig companies put their profits before their workers,” said Michael Robinson, a Lyft driver from Loma Linda, Calif., At a news conference Monday.
Who is on the other side of the courtroom?
Although the lawsuit focuses on how app-based companies treat their workers, the coalition of drivers and unions is suing the State of California and the Department of Industrial Relations, which administers employee compensation.
California attorney general is now defending Prop. 22 – an awkward twist as the attorney general sued Uber and Lyft before approving Prop. 22 to force companies to hire their drivers.
The gig economy companies can still get involved. Your coalition, Protect App-Based Drivers and Services, is a defendant in the lawsuit and has announced that it will appeal.
“This egregious decision is an affront to the overwhelming majority of California voters who passed Prop. 22,” said Geoff Vetter, a coalition spokesman. “We will appeal immediately and are confident that the Court of Appeal Prop. 22 will be upheld.”
California’s Attorney General or Protect App-Based Drivers and Services can appeal to overturn Judge Roesch’s decision. Even an accelerated appeal can take several months.
For now, gig economy companies may be required to pay into workers’ compensation funds – but companies argue that nothing will change until the appeal is resolved. They also said they had no immediate plans to change the classification of drivers. All provisions of Prop. 22 will remain in effect until the appeal process is completed, Vetter said.
Stacey Leyton, the drivers’ attorney, disagreed. “The Superior Court invalidated Prop. 22,” and drivers should be considered employees immediately, she said.
The California struggle is beginning to repeat itself in other states. In August, the companies moved a similar vote in Massachusetts, where the treatment of gig workers is already under scrutiny.
The SEIU and other union activists vowed to continue their struggle and plan to support the drivers’ organizing and activist efforts.
“We will continue to support their actions for their claim for fundamental rights granted to them under current law, which they were reaffirmed on Friday,” said Alma Hernández, executive director of SEIU California.