Labor & Employment Law Daily California app-based drivers will be exempted from state’s controversial independent contractor law
Friday, November 6, 2020

California app-based drivers will be exempted from state’s controversial independent contractor law

By Pamela Wolf, J.D.

Under the successful ballot initiative, app-based drivers will no longer be presumed “employees.”

A very closely watched California ballot initiative has brought a sigh of relief to giant rideshare companies Uber and Lyft, as well as other companies that use app-based drivers, such as DoorDash. According to Ballotpedia, California voters have approved Proposition 22, a measure that carves out an exception for app-based drivers in the controversial independent contractor law (A.B. 5) signed by Governor Gavin Newsom in 2019. However, the official results of the vote are not yet available.

ABC test. Under that law, workers are presumed to be “employees” unless the business can meet the “ABC test” approved by the California Supreme Court in Dynamex v. Superior Court and later codified by A.B. 5. Rideshare and other companies with app-based drivers would be unable to meet that test, which requires a showing that:

  • 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.
  • The person performs work that is outside the usual course of the hiring entity’s business.
  • The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Under Proposition 22, app-based drivers will be classified as “independent contractors,” instead of “employees,” and will not receive standard benefits and protections that businesses must provide employees. Proposition 22 instead says it will provide independent-contractor drivers with new benefits and protections not available under current law, including “a healthcare subsidy consistent with the average contributions required under the Affordable Care Act (ACA); a new minimum earnings guarantee tied to 120 percent of minimum wage with no maximum; compensation for vehicle expenses; occupational accident insurance to cover on-the-job injuries; and protection against discrimination and sexual harassment.”

Ongoing litigation. Notably, there is ongoing litigation related to a lawsuit filed by the California Attorney General and City Attorneys to halt Uber and Lyft’s continuing misclassification of drivers, contrary to the independent contractor law. Undoubtedly, that litigation will be impacted by the approval of Proposition 22.

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