On November 3, 2020, in the throes of one of the most contentious presidential elections in history, all eyes at Uber and Lyft were on California. The rise of the gig economy—a labor market that relies on independent contractors and freelance workers outside of traditional labor regulations—is a major subject of discussion among legislators across the nation. California’s efforts to reform and regulate the gig economy hinged on the passage or failure of Proposition 22 (“Prop 22”), a ballot initiative that defines app-based transportation and delivery drivers as independent contractors with their own personalized labor and wage policies. The gig economy titans spent more than $200 million on their campaign in support of the measure, the most expensive in the state’s history. This past November, the titans rejoiced: Prop 22 had passed with 58% of the vote. But what does Prop 22 mean for California’s app-based drivers, and what are its consequences for gig economy workers nationwide?
Gig economy giants, such as Uber and Lyft, assert that their app-based drivers are independent contractors, not employees. As independent contractors, drivers are exempted from major traditional protections under the National Labor Relations Act (“NLRA”) and other social protections like unemployment, workers compensation, and social security. Because app-based drivers are not covered by the NLRA, they do not have the right to unionize, collectively bargain, or engage in collective concerted activity. Without these traditional protections, drivers have no safety net in the event of job loss or on-the-job injury—including exposure to COVID-19. And because drivers do not have a protected right to unionize or engage in concerted activity under the NLRA, they are in a very vulnerable position if they endeavor to negotiate with their corporate “partners.”
Legislatures and drivers alike have hotly contested the classification of app-based workers as independent contractors, and Uber has seen criticism at an international scale. According to General Secretary of the International Trade Union Confederation (“ITUC”) Sharan Burrow, “[Uber]’s business model depends on ripping off the drivers who work for it, denying them employment rights and other entitlements continually driving their incomes down.”
Yet in April 2019, the Office of the General Counsel of the National Labor Relations Board (“NLRB”) issued an advice memo, setting forth the General Counsel’s opinion that Uber drivers are independent contractors. While the opinion specifically addressed Uber and UberX, the memo is expected to serve as guidance for similarly situated workers in the future.
The General Counsel’s memorandum rests on the rather novel position that “entrepreneurial opportunity” is critical to determining independent-contractor status. Entrepreneurial opportunity” is a very recent addition to the law governing employee status; until January 2019, the NLRB relied on the “nonexhaustive common-law factors enumerated in the Restatement (Second) of Agency”to determine an employee’s status, and explicitly rejected the position that entrepreneurial opportunity was a critical factor. At the outset of 2019, however, the NLRB overruled its former criteria. As the General Counsel advice memorandum states, the current test concludes as follows: “[W]here the common-law factors, considered together, demonstrate that the workers in question are afforded significant entrepreneurial opportunity, [the Board] will likely find independent contractor status.”
Uber and Lyft drivers arguably lack the hallmark indicators of entrepreneurial freedom. They cannot control their rates, they cannot command a higher rate as they gain experience, they are penalized for declining too many rides, and they are limited even in the routes they choose to take their passengers.
Initially, California was a site of great momentum in app-based drivers’ fight for basic employment protections. On September 18, 2019, California signed Assembly Bill 5 (“AB 5”) into law, codified at Section 2775 of the California Labor Code. The new law created an assumption that every worker in California is an employee, not an independent contractor, unless the employer can prove a three-part test: (1) “The person 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,” (2) “[t]he person performs work that is outside the usual course of the hiring entity’s business,” and (3) “[t]he person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”
Applying the new law, the Supreme Court of California in San Francisco County granted a preliminary injunction that enjoined Uber and Lyft from classifying their drivers as independent contractors. On October 22, 2020, California’s Fourth District affirmed the lower court’s injunction. Uber and Lyft sought to stay the litigation until the November 2020 election, awaiting the passage of Prop 22, but the court refused.
Sure enough, Prop 22 passed on Election Day. While Uber and Lyft spent over $200 million on media to promote their “Yes on 22” campaign, labor groups opposing the law raised just one tenth as much money. Uber delivered pop-up messages to users warning of longer wait times and higher prices if the ballot measure failed, and even sent its drivers in-app messages urging them to vote for Prop 22. “Yes on 22” solidified drivers’ status as independent contractors, continuing their exemption from major labor laws.
The ballot measure requires companies to provide additional protections to their workers, but the measures are weaker than those available to employees under California law. For example, California’s workers’ compensation program places no limit on covered medical care expenses, but the Prop 22 program mandates only $1 million in coverage. Employees in California are eligible for permanent disability through the state, but Prop 22 offers only two years of disability payments. Moreover, state workers’ compensation claims are decided by an independent body of objective judges, but Prop 22 does not explain how its private claims would be processed. As Glenn Shor, a former policy advisor at the California Department of Industrial Relations and lecturer in public health at Sacramento State University and UC Berkeley, told the Los Angeles Times, “They’re trying to re-create the workers’ comp[ensation] system, which is a couple hundred pages of law, in four or five paragraphs. You’re not going to get the same level of coverage, same level of benefits, or the same independent adjudication of the claim.”
Significantly, drivers will face additional obstacles to be compensated for COVID-related illness, disability or death. An executive order signed by Governor Gavin Newsome in May of 2020 established a presumption in workers’ compensation claims that essential workers infected with COVID-19 contracted the virus at work. Under Prop 22, drivers would not get the benefit of this presumption.
As the gig economy giants celebrate their victory and talk plans to take the initiative nationwide, have California voters made the right call? Or are we creating yet another loophole for employers to dodge existing labor laws?
About the Author: Nola Booth is currently a 2L at Cornell Law School. She grew up in Ithaca, NY and has a degree in Biology and Society from Cornell University. She worked as a judicial intern for the United States District Court for the Northern District of New York during her 1L summer, and she spends her free time with her partner.
Suggested Citation: Nola Booth, Proposition 22: What Does Your Uber Driver Deserve?, Cornell J.L. & Pub. Pol’y: The Issue Spotter, (Feb. 19, 2021), http://jlpp.org/blogzine/proposition-22-what-does-your-uber-driver-deserve/.