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How Proposition 22 Affects Independent Contractors in California

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On November 4, 2020, California voters passed Proposition 22 (“Prop 22”), which CNN describes as a “costly and controversial ballot measure to exempt firms like Uber and Lyft from having to classify their gig workers in the state as employees rather than as independent contractors.” Numerous businesses that will benefit from Prop 22 supported the measure, including Uber, Lyft, DoorDash, Instacart, and Postmates. In total, those companies put $200 million into the ballot measure, according to CNN, making it the “costliest ballot measure in California’s history.”

What do California business owners need to know about Prop 22 and how it will affect independent contractors in California?

What is Prop 22?

Prop 22 was known more formally as the App-Based Drivers as Contractors and Labor Policies Initiative, and it was designed to allow companies operating in the gig economy to avoid the “ABC test” in California. The ABC test, also known as Assembly Bill 5 (AB-5), took effect on January 1, 2020. That recent law, as you may know, makes it more difficult for a gig economy company to classify a worker as an independent contractor as opposed to an employee.

According to the California Labor & Workforce Development Agency, an employer must treat a worker as an employee (and not as an independent contractor) unless the employer can satisfy prongs A, B, and C of the test. The ABC test meant that many Uber and Lyft drivers, for example, would need to be treated as employees as opposed to independent contractors.

With the passage of Prop 22, both ride-hail (i.e., Uber. Lyft) and delivery drivers can be exempt from the ABC test requirements in order to be classified as independent contractors. Prop 22 does provide some employee-like protections to gig economy drivers who will be classified as independent contractors, such as a minimum wage guarantee., overtime pay, access to workers’ compensation, union rights, family and sick leave, or employer related benefits.

Can My Independent Contractors Remain in this Classification?

Businesses that have independent contractors and that operate through an app platform should consult with an attorney about whether their independent contractors can remain independent contractors in light of the new law. Many businesses still have independent contractors and do not currently comply with AB-5. Under AB-5, most of those independent contractors should be classified as employees.

Prop 22, voted in by Californians, shows hope for the gig economy. Many people like to operate businesses for themselves and to use independent contractors to provide services in California. Gig economy business owners, as well as other business owners in California, will need to wait and see if the legislature makes changes to AB-5 in light of Prop 22.

Contact a California Business Law Attorney

Do you have questions about how Prop 22 will affect the classification of your business’s employees or independent contractors? An experienced California business law attorney can speak with you today. Attorney Lynnette Ariathurai has been serving the Northern California business community for years and can provide you with the information you need. Our firm serves clients in Fremont, Hayward, Union City, Milpitas, and Newark.

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