The Effects of Proposition 22 in California on Uber and Lyft

With such a tense presidential election in 2020, some other contests and issues haven’t gotten a great deal of coverage. For example, voters in California passed Proposition 22, a law that affects the status of gig workers such as Uber and Lyft drivers.

What is Proposition 22?

Proposition 22 was a measure on the ballot in California concerning the classification of gig workers. Gig workers, including drivers for Lyft and Uber, have been classified as independent contractors. This is favorable to businesses since it means that they don’t have to hire these workers as employees and provide them with benefits. Lawmakers and labor leaders have been trying to change this and compel these companies to classify drivers (and other gig workers) as employees. Last year, a law called AB5 was passed, which compelled businesses to reclassify many independent contractors as employees. Proposition 22 was proposed to exempt drivers from this classification.

Some voters were confused about the implications of voting “yes” or “no” on Proposition 22. The confusion was due to the fact that passing this measure essentially maintains the status quo, reaffirming that gig workers are independent contractors and not employees. Voters passed the measure, which was seen as a rebuke to the lawmakers and activists who pushed for AB5.

Arguments for and Against Proposition 22

Here are the main pro and con arguments concerning this measure. Many of these points also pertain to the AB5 law.

In Favor

Gives independent contractors the freedom to work. Classifying them as employees might provide protection, but it also means companies can choose to not hire them at all.

Against

Allows businesses to treat gig workers as employees without providing them with benefits. Opponents of the bill argue that gig workers are compelled to work without important benefits such as health insurance.

Effects of Proposition 22 Passing

Proposition 22 passed comfortably in California. For the time being, Uber and Lyft drivers will remain classified as contractors and not employees. What are the implications of this for businesses, workers, and customers?

How it Affects Uber and Lyft

The companies themselves can breathe a sigh of relief. If the measure had been defeated, they’d be compelled to hire drivers as employees. In practice, this could have possibly meant these companies leaving California. At the very least, it would have likely resulted in cutting back on the number of drivers. It’s far more costly for a business to hire employees and pay out benefits than to work with them as contractors.

How it Affects Drivers

The majority of drivers were in favor of Proposition 22. While laws such as AB5 are supposed to protect workers, in practice they often mean that there’s less work available. If Uber and Lyft stopped operating in the state or cut back significantly, it would mean fewer jobs. While conditions for gig workers are far from ideal, they can now at least continue to work.

How it Affects Customers

Many of the voters who voted “yes” on Proposition 22 were most likely thinking of their own convenience. If the measure had been defeated, it would have become much harder for California residents to get rides, as ride-sharing companies would have either reduced the number of drivers or left the state altogether. What about ongoing concerns about the safety of ride-sharing services? If anything, the threat of legislation such as Proposition 22 should motivate Uber and Lyft to do everything in their power to provide a safe experience for customers and drivers alike.

The Future of Classifying Gig Workers

The debate over how to classify gig workers is far from over. There will likely be future legislative battles to reclassify gig workers as employees. Meanwhile, independent contractors in other industries (e.g. graphic designers, writers, etc.) are seeking to overturn AB5 or pass similar exemptions. Legislators in other states are watching how these debates play out in California to decide whether to propose similar laws in their own states. Thus, the long-term decision of how gig workers will be classified is still uncertain.

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