The historic elections of November 2020 saw a massive amount of campaign spending by Uber, Lyft, and other companies that employ “gig workers.” It was enough to sway California voters into passing Proposition 22 by a margin of 58.5% to 41.5%. Let’s take a step back at the beginnings of this legislation.

On January 1, 2020 Assembly Bill 5 was enacted into law in California. The bill held that “gig workers,” including rideshare drivers, would be classified as employees and not independent contractors. Companies like Uber, Lyft, and DoorDash would be financially impacted based on the cost of full-time employee benefits for a such a large and diverse workforce. California Proposition 22 was introduced to voters, and those companies and others pledged $200M to support the proposition with advertising to sway public opinion. With the victory, Proposition 22 does not overturn AB5, but carves out an exception for “app-based drivers and services.”

The Takeaway

What starts in California tends to find its way to other states. Like it or not, California has started trends around topics such as plastic grocery bags and vehicle emissions. The next hop for these trends tends to be similarly progressive states like New York, and then the middle of the country follows the lead eventually.

A precedent of legislation has been set. In the absence of federal and other state laws, this legislation will be cited as a precedent when state legislators in other parts of the country begin to tackle similar issues.

Mobile apps were key to the definition of the type of workers that were exempt from the legislation. Look for a flurry of mobile applications to help the workforce get matched up with work, especially in cases where the employer feels like it might not be clear if they are exempt under Proposition 22.

Employers clearly win, however you can’t deny the economic penalties of being required to provide benefits to a workforce who in any particular period could work zero hours or fifty hours. Costs would be passed along to consumers, and with such a broad customer base there would be unrest. That being said, employers we speak with care greatly about their work families and believe in a direct link between providing some kind of benefits and retention.

The long term implications of the rapid fire of legislation in California remains to be seen.