Uber, Lyft and other app based drivers will be leaving the gray area they currently occupy under California employment laws after the November 3rd election. The upcoming vote on Proposition 22 will decide whether these rideshare and delivery drivers will be considered employees or independent contractors.
The court case Dynamex Operations West, Inc. v. Superior Court of Los Angeles in 2018 eventually led to the passage of Assembly Bill 5. The bill introduces the “ABC test” into state legislation as the way to decide whether a worker is an employee or an independent contractor. To be considered independent contractors, three requirements of the test must be met:
• The worker 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 worker performs work that is outside the usual course of the hiring entity’s business; and
• The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Despite intense skepticism, Uber has attempted to argue that it is only a digital marketplace that connects independent drivers to customers, and that therefore driving “is outside the usual course,” of it’s business.
After a San Francisco judge ordered Uber and Lyft to comply with AB 5 and classify their workers as employees in August, the companies were allowed to resume normal operations until the results of an appeal in October. The California appeals court agreed with the earlier ruling on Wednesday, Oct 21. and gave Uber and Lyft 30 days to comply with AB 5 unless Prop 22 is passed, as reported by multiple media outlets.
While Prop 22 does establish some new worker benefits such as subsidizing healthcare for drivers and providing on-the-job accident insurance, they are not as expansive as those employees are entitled to under California law, such as overtime pay.
“The misclassification of workers as independent contractors has been a significant factor in the erosion of the middle class and the rise in income inequality,” AB 5 states.
Younger workers are taking on so-called “gig” jobs in substantial numbers, and are likely to stay gig workers even after gaining work experience, according to Associate Professor of Finance at CSULB, Laura Gonzalez.
“Research shows an increase in positions within the ‘gig’ economy. The growth is particularly large for the younger demographic with the anticipation of not changing as they gain experience in the workforce. Therefore, it is the future and policy makers will need to plan accordingly. As economists know well from our experience as investors in other nations, when inequality grows so does economic and political instability,” Gonzalez told the Signal Tribune.
Daniel Medina, a CSULB grad who drove for Uber to help support himself while in school, plans to vote no on Prop 22. While he recognizes that not all Uber drivers function as full time workers, he believes those that do deserve the same rights as employees.
“I think the situation is interesting,” Medina said. “On one hand, a lot of people drive for Uber and Lyft full time and it’s their main source of income. But on the other hand, some people would treat driving for Uber as just a quick way to get a little extra money. I think the people who work a certain amount of hours a week should be able to be treated as employees.”
Medina noted that his daily wages would be inconsistent while driving for Uber, and he was unable to predict how much he would have to spend on gas.
“The pay varied a lot based on a lot of different factors every day. More often than not, I was barely making much more than I would have to pay for gas. On holidays and trips that would take me toward downtown LA, the driving became more worth it,” Medina told the Signal Tribune.
One of Medina’s main criticisms of working for Uber was that drivers were not allowed to see the distance they would have to drive their passengers. This made it hard to predict his commute home after he was done driving for the day.
“When I worked for Uber the biggest problem I had with it was I couldn’t see where my passenger was going until they were in my car. So it would be a hassle to get back home after being driven very far, and you had to get lucky for someone to need a ride to go near where you live,” Medina said.
Since he was using a large portion of his earnings on gas to both drive for Uber and return home afterwards, Medina believes the company should reimburse drivers for the money they spend on fuel.
Under Prop 22 app based drivers would be reimbursed $0.30 for their driving expenses for every mile they drive after accepting a passenger or delivery on the app, referred to as “engaged time.” If Prop 22 fails to pass and these drivers are considered employees, they would be entitled to the standard IRS mileage reimbursement rate of $0.575 for all miles of business use.
While Uber and Lyft have argued that their business model will not be financially feasible if they’re forced to treat their drivers as employees, Gonzalez says this won’t be known until there is a clearer understanding of the companies’ potential financial obligations.
“One major factor in the business model is liabilities. While this factor remains unclear, so will the employment conditions for the drivers,” Gonzalez said.