Independent Contractor Designation for Gig Workers

About the Author: Daniel Whittle is a first-year law student at American University- Washington College of Law. Daniel graduated from Franklin and Marshall College and hopes work in a federal agency after graduating law school.

 

California is on the forefront of enhancing protections for independent contractors by ensuring, through legislation, they are provided insurance and other benefits ordinarily not granted to gig workers. This work is difficult, and made more so by the intense pressure and influence the gig industries now retain at their disposal. The classification battle began when the California Supreme Court ruled against the use of the traditional Borello test in Dynamex Operations West, Inc. v. Superior Court of Los Angeles. The Borello test is a multifactor test, used to define the employment status of workers. The Court, in Dynamex, rejected this test, and instead adopted an ABC test to determine workers’ employment status.[1] One difference between the Borello test and the ABC test is that the ABC test presumes that all workers are employees, not contractors, and places the burden on the hiring entity to prove that their workers are independent contractors instead of employees.[2]

In 2019, the California State Legislature passed Assembly Bill 5 (AB 5) to codify this ruling into law.[3] Uber, Lyft, and Postmates refused to comply with this law and attempted to negotiate with lawmakers and labor unions to create a separate classification of workers that would entitle independent contractors to additional benefits.[4] The law was far from perfect, and it ended up harming other gig industries, such as freelance writing, that were not the target of the bill’s provisions.[5] The law does provide a specific provision allowing freelance writers to contribute to up to 35 submissions per year to an individual outlet and will still be considered independent contractors, but this does little to provide the same level of opportunity that freelance writers had previously to raise their profile as a writer and gain valuable experience.[6]

In late 2020, the people of California voted on Proposition 22, the Protect App-Based Drivers and Services Act, which allows gig companies to continue classifying drivers as independent contractors.[7] Uber, Lyft, and DoorDash created the measure as a way to avoid the strict standards of AB 5 that would require gig companies to prove their employees should qualify as independent contractors, while also providing a wage floor and limited benefits to the drivers.[8] Before the measure was released, the state of California and cities of Los Angeles and San Diego sued Uber and Lyft for failing to comply with the provisions of AB 5.[9] The court ordered the companies to hire their drivers immediately, but Uber and Lyft threatened to shut down in California. This lawsuit will continue, but the passage of Proposition 22 will mean the state and cities party to the suit will only be able to seek penalties for the time between January when AB 5 was enacted and November when the Proposition 22 results were certified.[10]

Proposition 22 is an interesting piece of legislation representing the full and coordinated efforts of the private sector to alter their perception in the public, and in doing so, influence the legislature. Supporters of Proposition 22 spent a total of $204 million in comparison to opponents of the legislation, who only spent $20 million.[11] This was the most expensive ballot measure fight in California history, and represents an increasing trend of private businesses coordinating advocacy and outreach efforts to affect the legislative process.[12] In 2020, well-funded interest groups in California dedicated over $785 million to support or oppose only twelve ballot initiatives.[13] Furthermore, four of the top ten ballot measure battles of all time took place in 2020.[14] This marks a drastic increase in the coordination and financing of the private sector to attempt to sway public opinion and influence the legislature. This along with many of the gig companies refusal to comply with AB 5, indicate the private sector’s ability not just to sway the law, but to ignore it if not properly checked by the courts.

 

[1] See Dynamex Operations W. Inc. v. Superior Ct. of Los Angeles, 416 P. 3d 1 (Cal. 2018).

[2] Timothy Kim, The Dynamex Decision: The California Supreme Court Restricts Use of Independent Contractors, Sheppard Mullin Labor & Employment Law Blog (Apr. 11, 2021), https://www.laboremploymentlawblog.com/2018/05/articles/class-actions/dynamex-decision-independent-contractors/.

[3] Labor Code, section 3351, https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB5.

[4] Id.

[5] Scott Rodd, Uber, Lyft, Postmates Refuse to Comply with California Gig Economy Law, NPR (Apr. 11, 2021), https://www.npr.org/2020/01/04/793142903/as-california-tries-to-make-contract-workers-employees-industries-push-back.

[6] Id.

[7] Kate Conger, Uber and Lyft Drivers in California Will Remain Contractors, New York Times (Apr. 11, 2021), https://www.nytimes.com/2020/11/04/technology/california-uber-lyft-prop-22.html.

[8] Id.

[9] Id.

[10] Id.

[11] Ryan Menezes, Maloy Moore, & Phi Do, Billions have been spent on California’s ballot measure battles. But this year is unlike any other, Los Angeles Times (Apr. 11, 2021), https://www.latimes.com/projects/props-california-2020-election-money/.

[12] Id.

[13] Id.

[14] Id.

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