The State of California has reached a deal with Uber and Lyft to allow rideshare drivers to unionize.  As part of the deal, the two companies will support AB 1340, which creates a framework for drivers to unionize. In exchange, California’s legislators will back a measure sponsored by Uber and Lyft to cut insurance requirements for their drivers.

AB 1340 allows unions to trigger an election by presenting proof that at least 10% of active drivers support the union. If 30% of drivers vote in favor of unionizing, the state will automatically certify the union. Notably, AB 1340 does not reclassify rideshare drivers as employees, a goal of labor advocates. Instead, drivers will keep their independent contractor classification, depriving them of minimum wage protections and workers compensations insurance, among other employee protections. The bill is now headed to Governor Gavin Newsom’s desk, and he is expected to sign.

The deal could mark the end of years of litigation over the employee status of rideshare drivers. In 2018, the California Supreme Court handed down a ruling making it easier for workers to prove they were misclassified as independent contractors. California then passed a law codifying the Supreme Court’s ruling. But in 2020, voters then passed Prop 22, a ballot initiative funded by Uber and Lyft to classify drivers as independent contractors.

In return for supporting the union deal, California’s State Senate President, Mike McGuire, and California Assembly Speaker, Robert Rivas, agreed to back Senate Bill 371, a measure that cuts insurance obligations for rideshare drivers from $1 million to $60,000 per driver, making service cheaper.
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Lauren Teukolsky has represented workers for over two decades and her commentary on the latest developments in employment law is regularly featured by major publications such as Bloomberg Law, Law360, Law.com, and the Los Angeles Times. If you would like to speak with her about a wage-and-hour matter, click here.

One of the propositions on the ballot on November 3, Proposition 22, could have major implications for the future of AB 5 enforcement in California. If passed, the proposition would allow gig-economy companies like Uber, Lyft, and Instacart to classify their drivers as independent contractors instead of employees. These companies would be exempt from AB5, the new California law that requires most employers to classify their workers as employees.  Courts have consistently ruled that Uber and Lyft have violated AB5 by refusing to reclassify their drivers as employees since AB5 went into effect on January 1, 2020. As recently as October 22, 2020, a California appeals court ruled that Uber and Lyft must reclassify their drivers as employees rather than independent contractors. 

If Prop. 22 passes, Uber and Lyft would not need to comply with these court rulings.  As independent contractors, their drivers would not receive many of the benefits and protections of the employment relationship, like minimum wage protections, paid sick leave, workers' compensation benefits if they are injured or unemployment benefits in they become unemployed.

Backers of Prop. 22, including Uber, Lyft, Instacart, Postmates (owned by Uber) and DoorDash, have poured more than $187.5 million into backing the bill, making it the most expensive proposition in California history and dwarfing the $15 million raised by the opposition, spearheaded by labor groups who have traditionally represented the interests of working people over corporate interests. Prop. 22 would not only apply to Lyft and Uber drivers, but would cover all drivers who work for a "delivery network company," potentially including FedEx, Amazon, Walmart, UPS, and any other companies that makes deliveries in California.  

If passed, Prop. 22 would set a dangerous precedent in California.  Companies who don't like laws that the Legislature passes, and who don't like court rulings requiring them to treat their workers fairly, could simply open their coffers -- filled with the profits they earn by not spending money on employee benefits -- and buy themselves a ballot proposition. Significantly, Prop. 22 contains a provision stating that it cannot be amended except by a 7/8 majority of the Legislature, effectively tying lawmakers' hands for the rest of eternity absent a new ballot proposition.  California voters should reject this company-sponsored initiative and let the California Legislature do its job to govern in the interests of the people. 

If you think you have been misclassified as an independent contractor, contact Teukolsky Law today for a free consultation.