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Prop 22 Wins In California; Takes Uber, Lyft And Other Drivers Out From Under AB5

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Prop 22 Wins In California; Takes Uber, Lyft And Other Drivers Out From Under AB5

Proposition 22, designed to push back against AB5 in California for app-based drivers like those at Uber Technologies, Inc. (NYSE: UBER) or Lyft, Inc. (NASDAQ: LYFT), passed comfortably in Tuesday's election.

The vote was not close; prop 22 passed with about 58% of the vote. 

AB5 is the California law passed in the wake of the Dynamex decision that puts into law the so-called ABC test that was at the core of the Dynamex ruling in 2018. By doing so, even though there were carve-outs for a variety of professions that were added to later through amendments, it would have forced Uber, Lyft and DoorDash–the three companies behind Prop 22–to classify many of their independent contractor drivers as employees.

According to the Ballotpedia website, Prop 22 "defined app-based drivers as workers who (a) provide delivery services on an on-demand basis through a business's online-enabled application or platform or (b) use a personal vehicle to provide prearranged transportation services for compensation via a business's online-enabled application or platform."

There is no immediate or obvious impact on trucking. The role of AB5 on trucking in California remains in the balance as a federal appeals court considers a challenge to an earlier and ongoing preliminary injunction that cited a 90's era federal law–the Federal Aviation Administration Authorization Act–as effectively blocking the provisions of AB5 in the trucking sector. Oral arguments in the appeal were heard in early September.

The injunctions date back to a temporary injunction handed down last New Year's Eve, right before AB5 was to go into effect.

The main issue for trucking and for app-based transportation companies with both AB5 and Dynamex is the B prong of the ABC test. It classifies a worker as an employee if that person is engaged in an activity that is central to the company's existence. It would therefore not require a transportation company hiring an outside accountant as an employee, since the hiring entity is not an accounting firm. 

But a trucking company hiring an independent contractor as a driver, or a car transportation service like Uber utilizing independent contractors to haul passengers around, would fall under the B prong.

Uber, Lyft and DoorDash poured millions into the race, which was said to be the most expensive campaign ever for a ballet proposition. 

The vote comes just a few weeks after a court ruling that required Uber and Lyft to abide by AB5 and reclassify their drivers as employees. That ruling may now be seen as largely moot. 

However, within Prop 22 were some benefit provisions. According to the webpage of the Yes on 22 campaign, the new rule will provide drivers a "new earnings guarantee" and such benefits as "health-care stipends" and insurance for injuries incurred while on the job. There also is a provision for calculating pay by including "engaged time," which Prop 22 classified as "the time between accepting a service request and completing the request."

The California Labor Federation opposed the measure, saying on its website that Prop 22  "threatens good, middle-class union jobs. If these companies succeed in buying this election, their low-pay, no-protection business model will expand in virtually every industry, leading to unprecedented job loss and a race to the bottom."

Lorena Gonzalez, the labor-backed assemblywoman who sponsored AB5, did not specifically acknowledge the defeat on her Twitter feed. But she tweeted overnight that "fighting corporate greed & unlimited spending is never easy, but we do it."

More articles by John Kingston

Drilling  Deep: Sticking a stake into the heart of California's AB5 so far

Labor Department tackles employee classification; AB5 may not be affected

CTA makes its case to keep injunction against AB5 in California

 

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