After companies including Uber, Lyft, DoorDash, and others spent nearly $200 million campaigning for the addition of a ballot measure exempting them from the previously passed California AB5 ruling. They won, and so began Proposition 22.
The passing of Proposition 22 protects drivers’ preferences to remain classified as independent contractors with the flexibility to work when, where, and how long they want.
A notable aspect of the passing of Prop 22 is that future reform is limited by preempting local laws and requiring that any tweaks by the state legislature comport with its intent and pass with a seven-eighths supermajority.
That being said, members of related industries have already begun to see resulting effects since the passing of Prop 22. For example, in December 2020, grocery chain Albertson’s experienced mass layoffs of delivery drivers. Rather than continuing to employ full-time delivery drivers, they opted to hire contractors to provide these services at more affordable rates.
As time continues to pass following the implementation of Proposition 22 rulings, various states across the country have begun to look to California as an example for the future of the gig economy.
While many are in favor of the continued growth of the gig-economy as it now stands within California, labor unions across the country still stand to protect employment as it stands. The initial goal of AB5 legislation was intended to protect the rights and benefits of workers and eliminate the ability of corporations to seemingly take advantage of the contractor status. While Prop 22 stood to directly oppose this previously passed legislation, others across varying states see similar legal updates as harmful to employment as we know it nationwide.
Companies including Uber have been attempting to find a middle ground with labor unions since 2016. Reaching a middle ground would be ideal to support both ends of the spectrum and uphold labor law. Uber initially agreed to minimum wage implementation and offered to establish company-funded driver advocacy groups in exchange for their workers not being classified as employees.
Shortly after its passing in California, lobbyists that supported the Proposition began their attempt to spread similar policies nationwide. Despite their ongoing attempts to do so, they will face continued challenges to pass similar laws in many states without union support, including New York.
While this is the case, corporations including Lyft and Uber are continuously involved in conversations to attempt to reach a compromise and establish a middle ground. The ultimate goal would be to establish a model that offers the pairing of new benefits with the flexibility of contract work.
In the meantime, until a decision is reached for various states and expanded gig economy-based corporations, businesses should be extremely cautious and aware to properly classify their workers. The ongoing conversations and unknown future of the gig economy have opened the door for extensive EDD audits to ensure proper worker classification.
Should your business be identified as incorrectly classifying workers, you may likely be at risk of facing an extensive audit from EDD. If this is the case and you think that your business may be at risk of an audit, contact John Milikowsky and the legal experts at Milikowsky Tax Law immediately. John and his team have extensive experience successfully defending their clients in audits by both IRS and EDD and are ready to support and protect your business as well.
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