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How the Aftermath of Proposition 22 Impacts Consumers

Written by John Winer

For many years, companies and legislators have debated whether gig economy workers like those who work for Uber, Lyft, Instacart, Postmates, and DoorDash should be entitled to benefits such as minimum wage and unemployment insurance. In November 2020, gig economy companies celebrated a major victory after California voted to pass a controversial ballot measure to exempt them from having to classify their gig workers as employees rather than as independent contractors. According to a CNN report, Proposition 22 was the most expensive ballot measure in California’s history, with Uber and Lyft along with a few other gig economy companies spending more than $205 million to pass the measure on the ballot, but the newly passed proposition has been met with some challenges since its enactment.

Ballotpedia reported that Prop. 22 passed with around 58% of the vote with the help of the Protect App-Based Drivers and Services coalition, known as the Yes on 22 campaign, which worked to support its passage and raise over $200 million for the campaign. According to a Sacramento Bee report, under Prop. 22, drivers for gig economy companies only qualify for 120% of the minimum wage during the time they are picking up and driving a passenger in their car, plus 30 cents a mile. The companies are not required to contribute to Social Security, Medicare, or unemployment insurance, and few drivers qualify for other healthcare options. Contractors are typically ineligible for state unemployment insurance because they are self-employed, and they are the sole contributors to their retirement accounts. Independent contractors will find that liability insurance premiums are generally higher than the collective rates that employers will secure for their workers and it may be required by certain employers.

Earlier this year, Prop. 22 was met with its first legal challenge after a small group of app-based drivers and two major labor unions, The Service Employees International Union (SEIU) and the California Labor Federation, filed a lawsuit in the Supreme Court to overturn the ballot measure. According to a report by the Los Angeles Times, the suit claimed the measure was unconstitutional because it limited the power of the state’s legislature from creating and enforcing a workers’ compensation system for gig workers. One of the plaintiffs in the lawsuit claimed that the independent contractor status left drivers like him with “no savings, sick days, health insurance or unemployment during a pandemic.” After a brief review, the California Supreme Court declined to hear the case brought on by the drivers and unions, claiming the case could be filed in a lower court. Following the rejection, the plaintiffs alleged that they were still planning to continue pushing forward with their legal challenge against Prop. 22.

Not only did gig economy workers feel the negative effect of Prop. 22, but customers did as well. According to MarketWatch, soon after the measure was passed, some gig economy companies claimed they were planning to raise rates for customers. Uber called on increases on every ride and delivery a “California Driver Benefits Fee,” which the ride-sharing company said would vary depending on the costs of operating in different markets. DoorDash also said it was exploring slight increases in service fees. Gig Workers Rising, a worker’s rights group called the increase “a corporate bait and switch,” saying in a statement, “Uber and other app corporations said time and again during their Prop. 22 campaign that if the measure failed to go through, riders could expect higher rates. Now that Prop. 22 has passed, Uber is announcing that riders will have to shoulder increased costs after all.”

While Uber may have won their legal battle in the United States, it did not face the same outcome overseas. In February, a court in the United Kingdom ruled that gig companies must treat their workers as employees, forcing Uber to classify around 70,000 drivers as workers and give them some benefits, per a report by The Verge. Although drivers will still not be considered full-time employees, they would be able to accrue vacation time and receive a minimum wage while driving fares, as well as have the option of enrolling in a pension plan. It’s only been four months since the measure was passed and it has already been met with some challenges. It’s clear that gig economy workers need the same benefits that are provided to traditional workers, such as minimum wage, overtime pay, workers’ compensation, unemployment, and state disability insurance. As the pandemic forced many to seek jobs in the gig economy, it also exposed just how vital basic protections are for gig economy workers.

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