Question: 

I’ve been hearing about Proposition 22 left and right, but I have no idea what it is. I want to know more, so I can make an informed decision while voting.

Answer: 

Long story short: Proposition (or “Prop”) 22 is a response to recent changes in California law that make it impossible to classify app-based drivers as independent contractors. It is being heavily supported by multi-million dollar companies, which is why you’ve been hearing these ads like crazy. We’re going to break down what you need to know about Prop 22 below!

We’ll warn you: Prop 22 is long, which means this article is pretty lengthy, so buckle up! Ha, vehicles.

Proposition 22 Is a Result of Recent Changes in California Law.

Understanding the relatively recent changes to independent classification in California is fundamental to understanding why Prop 22 is on the ballot this year. If you’re not familiar with AB 5, AB 2257, or the Dynamex decision, we recommend starting with our blawg article here, which explains how workers are currently classified in California. Once you’re done reading, head back over to this page.

Background of Proposition 22.

Before we get started, note that this proposition addresses the classification of app-based drivers ONLY. It does not apply to any other industry. Under this proposition, an “app-based driver” would be defined as workers who:

1. provide delivery services on an on-demand basis through a business’s online-enabled application or platform, or
2. use a personal vehicle to provide pre-arranged transportation services for compensation via a business’s online-enabled application or platform.

Would Proposition 22 Repeal AB 5? 

Currently, California’s worker classification scheme (which we’re just going to refer to throughout as “AB 5” for brevity) makes it impossible to classify app-based drivers as contractors. If Prop 22 were to pass, it would mean that app-based drivers could be legally classified as independent contractors, not employees, unless the company engaging the driver:

1. sets drivers’ hours,
2. requires acceptance of specific ride and delivery requests, or
3. restricts working for other companies.

App-based companies (or “network companies”) could meet that standard much more easily than under AB 5.

So that brings us to the whole “does this repeal AB 5” question. Prop 22 does not outright repeal AB 5, but it would essentially override it for network companies that fall under the protection of this proposition.

Here’s Why Proposition 22 Matters.

If it wasn’t already obvious by the sheer amount of money spent lobbying in favor of Prop 22 (over $184.3 million as of the end of September 2020), there’s a huge imbalance of power between network companies and the workers they hire. By classifying workers as independent contractors, there’s a risk that this imbalance of power will intensify. This is because independent contractors generally receive less protection and benefits under law than employees do.

Proponents of Prop 22 will argue that the measure requires all network companies to provide new benefits to independent contractors, making these workers similar to employees while maintaining the flexibility of contractorship. “It’s a win win!”, they’ll say. However, Prop 22 has hidden weaknesses that are important to understand before making a decision on whether or not to vote in favor of this proposition.

How the Benefits Under Proposition 22 Stack Up.

Prop 22 would require that certain new benefits be provided to app-based drivers. In a nutshell, some of the main benefits outlined under this measure include:

1. An earnings guarantee;
2. Mileage reimbursements;
3. Healthcare subsidies;
4. Loss and liability protection;
5. Harassment policies; and
6. Limits on time worked.

1. Earnings Guarantee

Section 7453 of the proposition states that, “an app-based driver [must be] compensated at not less than the net earnings floor as set forth in this section.” Net earnings floor is defined as, “for any earnings period, a total amount that is comprised of: for all engaged time, the sum of one hundred twenty percent (120%) of the applicable minimum wage for that engaged time.” There’s also language about the mileage reimbursement as part of the net earnings floor, but we’ll get to that separately in the next section.

We’ve bolded “engaged time” above because it’s very important for understanding much of this proposition. Per section 7463, engaged time means “the period of time… from when an app-based driver accepts a rideshare request or delivery request to when the app-based drivers completes the rideshare request or delivery request.” In plain English, the driver will only be paid for the time they’re actively working by driving customers or picking up and delivering food/items.

To put this into perspective, when an employee works in a store, they’ll get paid for their time even if no customers come in, because they’re making themselves available for the chance that customers will come in. Not so with drivers under the language of Prop 22. Circling an area waiting for a request to come in? Gassing up the vehicle? Participating in any of the mandatory safety trainings? All of these scenarios are required in order to provide services under an app and would be compensable if the driver were an employee. But as an independent contractor under Proposition 22, none of these scenarios are payable time.

By the way, driving without passengers/deliveries is called “deadheading”, and some experts estimate total deadheading time may be anywhere from 35% to 50% of total time spent driving, depending on location, and sometimes even up to 60%! Assuming a driver clocks in a 10 hour driving shift, that means anywhere from 3.5 to 6 hours could be totally uncompensated.

So let’s do some math to see how this earnings guarantee shakes out. If we’re being charitable and going with the lower figure of 3.5, that leaves us with 6.5 hours of compensable time. Assuming the minimum wage in the area is $13.00, the driver will make the following based on the net earnings floor requirement:

$13 per hour x 120%= $15.60 per hour. → $15.60 per hour x 6.5 hours= $101.40

Keep in mind that it actually took a total of 10 hours to earn that total amount. When we divide $101.40 by 10 hours, the hourly wage equals $10.14 per hour, which is lower than the California minimum wage. Now imagine how low the pay would have been for a driver who deadheaded for 6 hours (we’ll tell you: it’s a little above $6 an hour).

2. Mileage Reimbursement

There’s also a mileage reimbursement, which is technically part of the earnings guarantee. We broke it out separately for clarity in explaining how the calculations work here.

Under Prop 22, drivers would be reimbursed $0.30 per mile until the end of the 2021 calendar year (it will be updated annually thereafter based on inflation). This is considerably lower than the current IRS standard mileage rate (57.5 cents per mile) that many employers choose to use. If a California employer chooses to pay employees less than under IRS guidelines, it will need to support why it’s doing so by proving that the employee’s actual costs and wear-and-tear are less than the national average.

Usually when employers choose a lower number, it’s only a few cents lower (55 instead of 57.5 is an example). But under Prop 22, the mileage reimbursement is almost half of the amount suggested under IRS guidelines. Because Prop 22 would allow network companies to skirt employment status, they can do this without any real repercussions, because they’re operating under contract law and not employment law.

It’s important to note that mileage for reimbursement is also measured based on engaged miles, which we discussed above. This means that number could drop to as low as $0.12 per mile if 60% of time is spent deadheading. That barely covers gas for a Corolla!

3. Healthcare Subsidies

We’re not going to lie: this benefit even perplexed us and it’s very numbers heavy. We’re going to start with some of the direct language from Prop 22 and then we’ll break down what it all means in layman’s terms.

Section 7454 states: “A network company shall provide a quarterly healthcare subsidy to qualifying app-based drivers as set for in this section.” It then goes on to state which drivers are considered qualifying drivers:

• For an average of 25 hours or more per week of engaged time in the calendar quarter, a payment greater than or equal to one hundred percent (100%) of the average ACA [Affordable Care Act] contribution for the applicable average monthly Covered California premium for each month in the quarter.”
• There’s also eligibility for drivers that drive less than 25 but more than 15 hours. Just swap out the 100% in the text above for 50%!

Now let’s dive into some of that bolded language. On initial read, it seems like a driver could have 100% of their premium covered, right? Read it again. It says, “one hundred percent (100%) of the average ACA contribution” for the premium, and that’s the catch. Later in section 7463 (9 sections later), the average ACA contribution is defined as “eighty-two percent (82%) of the dollar amount of the average monthly Covered California premium.”

So that means that, depending on how many engaged hours are driven, the subsidy would really be either 82% of the premium or 41% of the premium (not 100% or 50%). This section is deceptively written to seem like drivers are receiving more than they actually are by burying the important definitions several sections away.

Now let’s decode “the applicable average monthly Covered California premium of each month in the quarter.” This is also defined in section 7463 as, “the dollar amount published pursuant to subdivision (g) of section 7454.” Section 7454(g) states, “Covered California shall publish the average statewide monthly premium for an individual for the following calendar year for a Covered California bronze health insurance plan.”

Because Covered California doesn’t currently publish the average, we used a privately operated website to find the average cost of a bronze plan (that’s the lowest possible plan, by the way). On average, the annual cost in 2020 for a bronze plan was $1,041. If we divide that by 12 to find our monthly premium, we arrive at $86.75 per month. Assuming a driver does drive an average of 25 engaged hours or more per week, they’ll receive 82% of that premium amount, which is a total of $71.14. This number doesn’t change if the driver has dependents either—the proposition specifically says “for an individual” to keep this amount as low as possible.

Last thing before we move on: remember that we only consider engaged hours! If a driver is driving 25 engaged hours in a week, that means they’ll have driven about 40 hours total in a week if they deadheaded 35% of the time. This proposition is being promoted as a way to help people who want flexibility because they can’t work a full time job, but in order to receive this particular benefit, the driver essentially needs to work the amount of hours of a full time job. Just sayin’.

4. Loss and Liability Protection

Under section 7455, drivers are ensured, “occupational accident insurance to cover medical expenses and lost income resulting from injuries suffered while the app-based driver is online with a network company’s online-enabled application platform.”

That’s nice and all, but if the drivers were classified as employees, they would receive workers’ compensation coverage.  Workers’ compensation is “the nation’s oldest social insurance program,” and as such, has been litigated to the point that it’s well-settled and understood law. Prop 22 would be brand new territory, as its provisions have never been litigated before, meaning there could be unforeseen legal challenges when drivers try to use this benefit.

So while this is not the most offensive section under Prop 22, it’s also not as great as the drafters would want you to believe. It still presents more risk to the drivers if they are classified as contractors than if they had been classified as employees.

5. Harassment Policies

Prop 22 requires that all network companies develop sexual harassment policies, “intended to protect app-based drivers and members of the public using rideshare services or delivery services.” Drivers and users would be required to review the network company’s policy and confirm that they have reviewed it before using the services offered through the app. Drivers are also required to attend a safety training session that includes many subjects related to driving/delivery, but that also covers “recognition and reporting of sexual assault and misconduct.” All sounds okay, until you realize that the bar is set incredibly low compared to what is expected of employees in California.

Specifically, California law requires all employers of 5 or more employees to provide at least 1 hour of harassment and abusive conduct prevention training to all employees once every 2 years. The text of Prop 22 does not specify how long a required training would need to be, nor does it require that drivers take the training again over time. So hypothetically, this training could be a one-time, 30-minute training!

Additionally, California law requires that the employee training cover a broad range of topics and include practical examples of harassment based on gender identity, gender expression, and sexual orientation. Prop 22, on the other hand, only requires recognition and reporting of sexual assault and misconduct. Anything beyond that would be at the discretion of the network company.

This is all better than nothing, but “nothing” is pretty poor standard!

6. Limits on Time Worked

Prop 22 forces drivers to log off and rest “if an app-based driver has been logged on and driving for more than a cumulative total of 12 hours in any 24-hour period, without logging off for an uninterrupted period of 6 hours.” This particular portion of Prop 22 falls under Article 5 of the proposition—“Anti-Discrimination and Public Safety.” While this portion technically isn’t included under the main driver benefits article of this proposition, it has been touted by some supporters as a driver benefit.

But the problem is, while rest is important, this portion falls short of meaningfully benefiting drivers. Yes, it may keep them safe. But if people are attempting to drive uninterrupted for more than 12 hours at a time, it’s probably not for fun or as a side gig. It’s because they desperately need the money and safety on the road is probably the least of their concerns.

When an employee works more than 8 hours (but less than 12), the employee should be compensated at 1.5x their regular rate of pay under wage and hour law. This means that if drivers were classified as employees, driving for up to 12 hours would put them well into overtime territory. But Prop 22 doesn’t require overtime. It just requires rest.

This portion could have been drafted to require rest to keep the public (and drivers) safe, while also requiring additional payment similar to overtime to drivers that work these long hours. However, the drafters chose not to include this, making that earnings floor we debunked even more bogus.

I’m Not An App-Based Driver—Should I Care About Prop 22?

At the very least, everyone who pays taxes in California should care about Prop 22.

This proposition states, “If this Act is approved… and thereafter subjected to a legal challenge which attempts to limit the scope or application of this Act in any way, or alleges this Act violates any local, state, or federal law… both the Governor and Attorney General refused to defend this Act… the Attorney General shall appoint independent counsel to faithfully and vigorously defend this Act on behalf of the State of California…. In order to support the defense of this Act… a continuous appropriation is hereby made from the General Fund of the Controller… in any amount necessary to cover the costs of retaining independent counsel.”

So if you dropped off on that legalese, it basically says that if someone challenges this proposition after it becomes law (if that happens) and the Governor and Attorney General don’t want to fight in favor this law, a private attorney will be hired and taxpayer funds will pay for that attorney, no matter how much it costs. Yikes.

What Happens If This Proposition Passes And We Decide it Wasn’t the Greatest Idea? 

Prop 22 creates a high threshold for amending it in the future. Assuming Prop 22 passes, it would require a seven-eighths (87.5%) vote in each chamber of the California State Legislature (plus the Governor’s signature) in order to amend this law in the future. Not sure if you’ve paid attention to American politics lately, but it’s virtually impossible to get an 87.5% vote on anything. There would have to be extreme bipartisan support to make this happen.

To top it off, this is the process only if the amendment is consistent with, and furthers the purpose of, Proposition 22. The language of this proposition specifically states that “Any statute that amends Section 7451 [the “Protecting Independence” portion of the proposition] does not further the purposes” of Proposition 22.  It’s unclear who would determine whether or not an amendment would fall under this standard (likely judges), but in any case, it’s very circular and pretty difficult to interpret!

If an amendment is not considered consistent with, and furthering the purpose of, Proposition 22, the amendment would need voter approval before it could pass. Which means another measure on the ballot similar to this one. Do we all really want to have to vote on this stuff again?

Wrapping It All Up… 

Not all of Prop 22 is bad. There’s some language about making it unlawful to impersonate an app-based driver, presumably to prevent would-be abusers from harming passengers or stealing from businesses sending out deliveries, and in theory, that’s a good idea. But the majority of the language here is half-baked. It sounds great until you really dig in and realize what you’re getting.

The top four ride-hailing companies in the world, among them Uber and Lyft, have a combined valuation of $166 billion. They can afford to make drivers employees and give them the protections they deserve while maintaining the flexibility of hours that so many supporters of Prop 22 claim is their motivation for voting yes. It all comes down to what these companies value—spoiler alert: it’s not drivers.