Prop 22, a new tech employment law recently passed in California, turns the old employee-contractor paradigm on its head, and – as a potential blueprint – has global implications for the future of work. The fact that a handful of tech companies spent a staggering 205 million dollars on crafting and lobbying for it, underlines its importance to tech behemoths’ business models. Furthermore, this places tech companies at the forefront of rewriting labor laws for the digital age.
As a new law, Prop 22 grants app-based transportation and delivery companies a special exception to Assembly Bill 5’s (AB5) classification of their drivers as employees, instead classifying them as “independent contractors.” Claiming that this would harm their business models and ultimately society, these tech giants (Lyft, Instacart, Postmates, and DoorDash), under the leadership of Uber, undertook creating an exception that places drivers in a newly established, hybrid category – somewhere between employee and contractor.
While opinions on whether or not Prop 22 will be beneficial to workers differ, one thing is certain: Prop 22 sets an important precedent for the rest of the world and creates a third template for workers, which has implication for all businesses. In this article we summarize some of the pros and cons of Prop 22, and share some of our recommendations.
PROS
Benefits to drivers
- Flexibility and work opportunities
Prop 22 grants drivers the flexibility of working whenever they want, although that was patently the case already with gig work. The ongoing appeal of gig work is its ability to provide struggling workers who have recently lost income or jobs, among others, with independence and easy access to earning opportunities.
- Health care and insurance
Prop 22 provides a better healthcare threshold than state and federal laws, which only require it to be provided to those working above 30 hours per week, with no explicit benefits for part time workers. With Prop 22, drivers logging 15 plus hours per week would start to earn towards a health care contribution. This ramps up at 25hrs to 100 percent of the average employer payment toward a Covered California Plan, or $367 per month to a driver on average. They can also earn multiple contributions if they work with multiple platforms. Occupational accident insurance for on-the-job injuries is also provided.
- Ensuring financial benefits
The new base hourly compensation under Prop 22 is around $16.80, which is higher than the minimum pay under fair labor standards, provisions and regulations. Drivers will receive pay from the time they accept a delivery or ride, to the time they drop the order or passenger off. This hourly compensation is a minimum hourly earnings guarantee, and drivers will regularly earn more. Prop 22 also advocates for 100% of tips paid, to the driver, in addition to the minimum earnings guarantee, and payment of 30 cents per mile for expenses.
Benefits to consumers and the public
- Protecting the elderly and most vulnerable populations
Ensuring worker flexibility makes working for app-based delivery and transportation companies attractive, and increases the number of drivers so that essential services such as the delivery of food and medicines to seniors and families who are forced to stay in their homes, can run smoothly.
- Supporting businesses and essential workers
By promoting worker flexibility and economic security, Proposition 22 could safeguard the availability of app-based home delivery services that are helping restaurants and business survive. The legislation also stimulates rideshare services and assists essential workers getting to their jobs.
- Increasing public safety
Prop 22 ensures recurring background checks of drivers, mandatory safety training, a cap on driver hours per day to avoid sleepy drivers, and a zero tolerance for alcohol and drug offences. However, several jurisdictions already mandate these checks.
CONS
- Innovating a playbook for having favorable laws passed
To get Prop 22 passed, the tech consortium first conceived and crafted this exception, then spent a historic $205mm on the campaign for getting it passed: the largest amount ever spent on a proposal. This sets a dangerous precedent for other companies and effectively creates a political, strong-arming template for future tech company law-making.
- Forcing drivers to work longer shifts
Under Prop 22, drivers are only paid for the time they spend driving, and not the time spent in between jobs. This means that workers will have to work longer shifts to make up for lost wages – and may actually earn less than they currently do.
- Stripping away benefits provided under AB5
Paid sick leave, unemployment insurance, and the AB5 standard of healthcare are no longer provided. Although the legislation claims to provide workers with better healthcare, it is worth noting that drivers are only covered based on their “engaged time”, providing less overall healthcare security.
- Allowing companies to shift safety responsibilities to the State
Prop 22 claims to increase public safety, while in reality it weakens current protections for both riders and drivers. Under the new legislation, sexual harassment training is no longer required, neither are the obligations of these companies to investigate both customers’ and drivers’ harassment claims.
- Protecting our most vulnerable?
Delivery and transportation services are not affordable for everyone – rendering the argument that Prop 22 will help protect the vulnerable predicated on a slice of affluent demographic.
- Not a one-size-fits-all model
While we applaud the idea of creating new worker categories fit for the digital age, Prop 22 does not take into account the considerable variety of driver profiles. It sweeps all drivers under the same umbrella, allocating them to a somewhat simplistic formula.
On one hand, we recognize that while this new law is far from perfect – as with every nascent innovation – there lies an opportunity for tech companies to continue evolving the tenets of Prop 22. It requires shaping for a more nuanced benefit to stakeholders such as drivers and society at large. On the other hand, by crafting and ensuring the passage of digital age labor laws, tech behemoths have to recognize their growing power to substantially affect societal outcomes and act in a manner that brings about enduring and fair results. Prop22 should be seen as neither a final standard, nor one that can be applied heedlessly on a global basis.