On November 3, Proposition 22 - formerly known as the App-Based Drivers as Contractors and Labor Policies Initiative - notched 58% of the vote in California.
More than $224 million was spent by companies like Uber, Lyft, and DoorDash marketing it.
Now, if you’re even marginally interested in the rideshare industry, you’ve surely read about Proposition 22 from one of many news outlets that have been writing about for some time.
You surely understand that Proposition 22 is important, not just for drivers in California, but to the ones in the entire country. However, do you know what the preposition is actually about?
If you don’t, you’ve come to the right place. We’re going to explain everything, starting with...
What’s the Prop. 22 Backstory?
It all began almost a decade ago. In 2012, Lyft started paying drivers to use their own cars to taxi others around. Soon after, Uber joined the party and both companies started overtaking the global taxi market. But unlike most taxi companies, they classified their workers as contractors.
Keeping people as contractors protected companies from liability and allowed them to avoid paying their employees’ insurance and overtime hours. The drivers were making a lot of money, the state and federal governments didn’t say anything, and more companies started popping up.
Soon, we had dozens of startups like DoorDash, Postmates, and Instacart trying to cash in on the ridesharing craze of the early 2010s. But while the government let Lyft and Uber slide, it doesn’t mean that certain officials didn’t have a problem with this contractor business model.
In California, the government determines whether a person is a contractor or not using a complex set of 11 questions called the Borello test, established back in 1989. The thing was, most Uber and Lyft drivers would fail this test.
Who Was Pushing for Prop. 22?
In 2019, Assembly Bill 5 reaffirmed that drivers need to be classified as employees. Consequently, this would make the driver entitled to labor protection, like sick leave, minimum wage laws, and many more. Rideshare giants were unsurprisingly opposed to this.
Companies like Lyft, Uber, and DoorDash argued that switching their contractor business model would simply be too expensive. Not only would they lose hundreds of millions but hundreds of thousands would be out of jobs.
All of these companies were actively pushing against their drivers doing the Borello test. According to a report commissioned by Lyft and Uber, their drivers spent almost a third of their time waiting for people to contact them.
Officials told the media that they only want to pay their drivers for revenue-generating work. This not only helps companies save money when the drivers aren’t taxiing anyone around but also helps incentivize the drivers themselves to seek clients.
Then, Assembly Bill 5 came into effect in January 2020. But rideshare giants weren’t going to sit still. DoorDash, Instacart, Postmates, Uber, and Lyft combined, poured more than $188 million in the past 12 months, trying to keep their workers as contractors.
What’s Exactly in Prop. 22?
Is Prop. 22 good for workers or does it only benefit their employers? A fraction of workers were fighting the Proposition for the last year, in an effort to get more employee protection. Prop. 22 would help their case by employing them, instead of hiring them as contractors.
However, their employers were arguing that since the pandemic has started, they’ve been losing billions of dollars due to the lockdown. If they started paying hundreds of thousands of workers across the US for the time they spend waiting for passengers, they would go bankrupt.
That’s why they came up with Proposition 22, which guarantees that drivers will earn at least 120% of the minimum wage in their local area, plus $0.30 per mile. In the US, the minimum wage is $15 an hour, which means Uber and Lyft drivers would earn at least $18 an hour.
If we assume that an average driver goes 20 mph during their shift, they would earn an additional $6 an hour. That would make the minimum wage for drivers $24, without including tolls, tips, cleaning, and airport fees.
This means that the average Uber and Lyft drivers would earn as twice as much as the average US worker. However, the companies still refuse to pay their drivers for overtime, even if they work more than 8 hours a day and 40 hours a week.
What Are the Ramifications of Prop. 22?
Since their victory in California, Uber, Lyft, and company are planning to take their case further. That’s because multiple states have sued them in the past, and they’re now looking for a way to get more propositions approved.
Some of the potential targets include Massachusetts, New Jersey, and New York, among many, many others. In these states, the courts have rejected the argument made by rideshare companies that drivers run their own independent businesses.
How do the drivers feel about the entire ordeal? While there’s been pushback from a certain number of rideshare drivers, some of them are satisfied with the way things turned out. According to informal surveys, most drivers prefer to stay independent.
Where to Go From Here?
To finish things up, here’s a quick summary of the Prop. 22 ballot:
Rideshare drivers are not classified as employees
All drivers are now “independent contractors”
As such, they aren’t covered by most employment laws
However, they’re entitled to minimum earnings, insurance, and healthcare
Impersonation of rideshare drivers is now officially criminalized by law
In the end, will Prop. 22 improve the lives of rideshare drivers and the industry as a whole? Only time will tell. As soon as we find more things out, you’ll be able to read them on our blog.
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