Unlike their Boomer parents, more Millennials have found themselves working flexible, temporary, or freelance jobs instead of plugging in 40+ hours a week at a full-time position. App technology and online platforms have made it easier for people to find and book gigs. Traditionally, gigs are used for supplemental income or to relieve financial strain during periods of unemployment. But when does a gig transform into employment? That’s the question asked with Proposition 22, a ballot measure brought up in the November 2020 election in California.
Tonje Ettesvolle, a ‘full-time’ rideshare driver estimated that in their area the drivers working more than 40 hours a week completed more than 90% of the rides on the app. Implying that driving for companies like Uber was employment and not a gig for the majority of drivers.
Generally speaking, gig workers are independent contractors. Only employees qualify for employee benefits. To determine if a worker is an employee or independent contractor, a “ABC Test” is applied. As CNN explains, the “ABC test” “lays out three requirements an employer must meet to prove their workers are independent contractors: One, that the contractor provides the service free from the company’s control; two, that the service provided is outside the company’s core business, such as a janitor at a law firm; and three, that the contractor is an independent professional engaged in providing their service to companies other than the one in question.”
Lawyers representing gig workers like rideshare drivers argue that the drivers provide a service that is within these companies’ core businesses and (to some degree) are under the companies’ control.
In California, this belief that some gig workers need to be reclassified as employees led to the creation of AB 5 in 2019. As many of these companies are still not profitable, keeping labor costs down appears to be their only hope for remaining in operation and getting ahead.
Law AB 5 would allow the state to force companies like Uber to reclassify gig workers as employees with benefits.
Uber, Lyft, and Postmates argued that providing benefits like paid time off, health care, and unemployment insurance would significantly increase consumer prices and strip gig workers of their independence. To them, the change would very likely be detrimental to their business model.
So, after appealing the ruling, the companies were able to bring Prop 22 to a ballot vote. With Prop 22, the companies would offer some gig workers some benefits like a minimum earning guarantee based on engaged time and a health insurance stipend.
Together the companies spent over 200 million to convince voters to support Proposition 22. This was the most ever spent on a ballot measure in California. For reference, those opposed to Prop 22 were only able to raise 20 million to defend their position. Ultimately, the cost was worth it as the vote went in their favor.
In their messaging, the companies argued that “Prop 22 will protect drivers’ preference to be independent contractors with the flexibility to work when, where, and how long they want.” (CNN) However, testimonials like Tonje Ettesvolle, Chase Copridge, and many others prove that what drivers want and need is full-time employment with benefits. Enrolling drivers as employees would be a relatively easy effort because of existing technology.
Moreover, compared to other gig economy platforms like Fiverr and Upwork, drivers and delivery people for these apps don’t have as much independence. Yes, they get to choose when they log into the apps to work. However, they don’t get to set their rates and are penalized for turning down gigs.
The campaign funded by Uber, Lyft, and Postmates confused consumers as to which option was most helpful for gig workers. On the one hand, being pro-Prop 22 meant that workers got some benefits. However, that would likely come at an increased rate for services. That increase threatened the collapse of the industry; so no services for consumers and no gigs for workers.
In the end, voters went in favor of the ballot measure. As expected, some rideshare and food delivery companies have raised their prices to cover the cost of the new perks to gig workers that were voted into law via Prop 22. Bloomberg Quicktake reported that Uber and DoorDash raised prices for customers. “In Los Angeles, the surcharge on Uber rides will be $0.75, and food delivery bills will go up $0.99.”
As these gig economy companies move to fight similar battles in other states, labor experts worry that this might be the start of the end of worker rights. Having a large percentage of the working population without benefits and securities is detrimental for society. In a more ideal world, benefits like health care wouldn’t be tied to one’s employer, but that’s not where the U.S. is at. For now, the only thing that can be done is to educate gig workers and consumers on the industry so that the choice to provide and protect workers’ rights will become law.