The future of Uber, Lyft, DoorDash, and similar gig companies was on the agenda in California, where voters approved a proposal that app-based drivers be classified as independent contractors.
This designation is crucial for the business models of companies that rely on a network of hundreds of thousands of independently commissioned gig employees. However, the measure known as Prop 22 also offers passengers and deliverers some new benefits, including a minimum earnings guarantee.
Uber, Lyft, and other similar gig companies endorsed the move, spending more than $ 200 million on Pro-Prop 22.
But Alexandrea Ravenelle, a gig economy researcher and author of “Hustle and Gig: Fighting and Surviving in the Sharing Economy,” told The Penny Hoarder that she was “disappointed with the drivers and the working public.”
“Uber and Lyft spent $ 200 million to avoid having their workers treated as employees,” she said. “Workers in other countries should expect this change to affect labor disputes elsewhere in the future.”
Prop 22 is undoubtedly controversial. But what exactly is it and how will it affect you as a driver?
An introduction to Theorem 22
At the center of the Prop 22 debate was whether app-based gig drivers in California should qualify as W-2 employees or 1099 independent contractors.
W-2 employees are eligible for employer-sponsored health insurance if they work at least 30 hours a week. Employee Compensation for Injuries in the Workplace; Contributions to social security and unemployment insurance; and the ability to take sick leave or care leave. These are all costs borne by employers – that the Ubers of the world want to avoid.
The gig companies have largely framed Prop 22 like this: 1099 independent contractor status means flexibility, and W-2 staff work means rigidity.
Ravenelle said the framing caused a “false dichotomy” and that this shouldn’t be an either-or scenario.
“Uber, Lyft, and Doordash … marketed Prop 22 by claiming that being an independent contractor is what all workers want and what is best for workers,” she said.
Why were Uber and Lyft directed to reclassify their workers in the first place? A new California labor code called AB 5 mandates that companies that control when or how their independent contractors work must classify them as W-2 employees. When Uber and Lyft failed to comply with the new law, the state sued the two ride sharing agencies.
The passage of Prop 22 signals the end of the legal battle in California. However, AB 5 is still in force. It applies to a lot more than these handful of gig companies. Only “app-based transport and delivery companies” are now exempt from labor law. It is unclear how other gig companies that are not specifically transportation or delivery related will be affected.
Prop 22 not only exempts ridesharing and delivery companies from having to reclassify their employees, but it also gives drivers some additional benefits – a “third avenue,” as companies sometimes call it, which is between 1099 and W-2.
What will change for ride share and delivery drivers under Prop 22?
Your independent contractor status will remain unchanged, but you will see some new benefits.
The following benefits anchored in Prop 22 are based on your “committed time”, ie the time that you spend logged into the app and Traveling with a passenger or a delivery:
- A “guaranteed profit”. This provision guarantees you 120% of your local minimum wage based on the “employment time” in the app, not in real time – plus 30 cents per “employment time”. Tips are not included in this equation. You are extra.
- A health grant. If you drive an average of 25 hours of dedicated time per quarter, you will receive a quarterly grant towards your Covered California award. Drive between 15 and 25 hours a week and you’ll be eligible for a healthcare grant of 50% or more.
- Work injury insurance. This insurance program covers medical expenses and loss of income related to injuries that occurred while you were logged into the app. It covers “up to at least” $ 1 million in medical expenses and 66% of your average weekly income.
While these benefits weren’t available prior to Prop 22, critics say they’re not enough.
“The benefits included in the initiative pale compared to what workers are entitled to under state law,” wrote researchers from the National Labor Law Project and Working Family Partnership in a report on Prop 22.
W-2 benefits allegedly would have been extended to drivers if Prop 22 had failed.
The gig companies have not yet released a schedule of when their new benefits will be rolled out. In an email to the drivers, Uber said they will be available “as soon as possible”.
This article originally appeared on www.thepennyhoarder.com