California Prop 22: Where Are We Now?

California's Proposition 22 went into effect on January 1, 2021. Its implications go far beyond California, however, as rideshare apps like Uber and Lyft aim to create similar legislation in other states and countries.

Proposition 22 was a high-stakes measure on California’s 2020 election ballot. With its passage in November 2020 and implementation in January of 2021, the measure carried major implications for rideshare apps such as Uber and Lyft. A “yes” vote was a vote for classifying drivers working under the app as contractors, thus adopting labor and wage policies specifically aimed at app-based drivers and companies. A “no” vote opposed such an initiative, retaining California’s Assembly Bill 5 (AB5), meaning rideshare companies would then likely have to classify their drivers as employees. 

For and Against...

Those who supported the Prop 22 initiative have suggested that the measure favors gig-economy workers. Without the measure in place, many argue, there would be less flexible work options for the everyday worker who benefits from flexibility regarding when, where, and how they work. Supporters for prop 22 are in favor of viewing the rideshare app’s workers as people in need of supplementary income streams.

Those who opposed the measure believe that the corporate offices of such profitable rideshare apps are too easily absolved of basic employer responsibilities and worker protections, such as providing unemployment benefits, health insurance, opportunities for collective bargaining, and more. The current “contractor” status of rideshare app drivers, according to The Employee Rights Advocacy Institute, creates an unfavorable situation for rideshare drivers. “Because these workers are not classified as employees,” they say, “They are not protected by laws surrounding minimum wage, overtime pay, paid family leave, sick leave, retaliation, and collective bargaining.”             

The Aftermath

After a California record-breaking $204 million contribution toward advocating for the measure from Uber and Lyft, Proposition 22 was officially passed following the November 3, 2020 elections. As usual, the aftermath had a wide range of residual effects: some good, some bad. It depends on who you ask. 

Many of the newly established benefits that were supposed to come as a direct result of Prop 22 have fallen short of their expectations. For instance, take the Prop 22 promise to pay an hourly wage that equals 120 percent of California’s minimum wage. “A study by the UC Berkeley Labor Center,” according to the California Law Review, “estimated that the actual guaranteed figure plummeted to as low as $5.64 an hour when accounting for unpaid waiting time, unreimbursed waiting time costs, underpayment for driving expenses, and payroll taxes.”

Other critiques of the measure have pointed out the negative residual impacts that have taken place since its passing. In the aforementioned analysis from the California Law Review, they observed other industries that have cut ties with full-time, unionized workers in favor of partnering with rideshare/delivery service apps. “Whatever benefits Proposition 22 brings come at the enormous expense of full-time employment positions in certain industries,” the report says. “For instance, grocery store chains Albertsons and Vons announced in January 2021 that they would lay off their unionized in-house delivery drivers and replace them with DoorDash contractors in light of the new law.” The concern here is that businesses across a wide range of industries will follow suit.  

As mentioned earlier, the ensuing consequences of Prop 22’s passage can be good and bad. There are two sides to every story.

Positive driver responses to Prop 22 and new employment protections from the measure were highlighted in a recent study conducted by the Benenson Strategy Group. According to their survey, over 80% of drivers indicated that they are happy that the measure was passed. Additionally, 76% of drivers agreed that they personally benefit from Proposition 22, and 52% said they believe their driving situation will improve now that the measure has been passed.

According to Uber, new benefits for drivers as a result of Prop 22 include:

  • Guaranteed minimum earnings: While active, drivers can expect a guaranteed 20% increase in earnings when compared to the pick-up city’s minimum wage.
  • Injury Protection: As of December 16, 2020, Uber purchased injury protection insurance for its drivers with no requirement for enrollment or added fees.
  • Healthcare Stipend: As of January 1, 2021, drivers with qualifying plans and a minimum of 15 hours active driving per week receive additional stipends to help cover their healthcare cost.  

What’s Next?  

Although Prop 22 was a piece of legislation exclusive to California, the voter response has lit a fire for rideshare app execs as they work towards passing similar legislation throughout the United States. Uber CEO Dara Khosrowshahi said, "Going forward, you'll see us more loudly advocate for new laws like Prop 22." He added that Uber hopes to "work with governments across the U.S. and the world to make this a reality.”

Others don’t have such a positive outlook for the future of gig economy apps and their legislative efforts. Meredith Whittaker, a professor at New York University, wrote, "To get Prop 22 passed, gig companies...spent a historic $205 million on their campaign, effectively creating a political template for future anti-democratic, corporate law-making. ... This corrupt campaign worked. $200 million is a lot of money, but it’s a lot less than the long-term prospect of paying a living wage to workers and being responsible to consumers for safety and accessibility. Their gamble paid off, for now."    

Further Reading