[California] Prop 22 Victory: What It Means For The Gig Economy
Investopedia explains disruptive technology as ” an innovation that significantly alters how consumers, industries, or businesses operate.” For example, you can order your favorite meal from the nearest eatery on your smartphone app, and it’ll be delivered to you in no time.
Disruptive technology has significantly changed several industries, including food, inner-city travel, etc., and how people work. Companies like Uber, Lyft, Door Dash, Instacart, and more have taken advantage of disruptive technology to provide a fast, efficient, and reliable service to their clients. They have also made work more flexible as people can take up gig jobs with a click, leading to flexibility and convenience.
While app-based companies have highlighted the benefits of their business model to gig workers, the legislature in 2019 in California had a different view.
Prop 22 Victory: What It Means For The Gig Economy
The Genesis of Assembly Bill 5 (AB5)
The California Senate on Tuesday, 12 September 2019, approved AB5 that would come into effect in January 2020. AB5 was enacted to rectify a long time of instability and wage changes and ensure that gig workers had sufficient protections in the gig economy.
Owing to app-based companies’ rapid growth, the number of independent contractors, such as drivers, ballooned, resulting in increased operating costs. To minimize costs, companies were forced to demand more out of their gig workers, leading to low wages.
Realizing the workers’ cries for more protection, the California legislature crafted AB5 to force gig businesses to treat their workers as employees. As employees, workers would receive a living wage, healthcare vacation, sick leave, and other associated benefits.
The Counterattack by gig companies
App-based businesses, including Lyft, Uber, and Door Dash, mounted a massive, heavily funded campaign to oppose AB5. After developing a counter-proposal, popularly known as California Prop 22, they spearheaded an onslaught against AB5 on a whopping budget of nearly $200m.
They took the battle to California residents during the November elections of 2020 and appealed for their help in thwarting AB5 and supporting Prop 22. Leaving no stone unturned, they bombarded TV airwaves, their apps, and social media in convincing the electorate that Prop 22 would improve the gig workers’ financial situation and their work conditions.
Companies explained that if AB5 were left intact, it would raise fares, lead to longer wait times, suspend some services in areas with less traffic, and worse, most drivers would lose their jobs, causing more financial woes.
Dubbed Prop 22 victory, the companies persuaded people to knock down some parts of AB5 as Prop 22 passed with a 58% majority translating to 6.7 m votes.
Prop 22 and its implications to the gig economy
Pros for the gig workers
The companies argued that Prop 22 represented the workers’ best interests and preferences since most preferred the business model. It allows app-based drivers and others flexibility, convenience, and the possibility of earning extra income.
It will also guarantee gig workers a minimum hourly wage with some health benefits as long as they can meet 15 hours of work. The healthcare benefits will include medical and disability coverage and illnesses in the job. As stipulated in the Affordable Care Act, gig workers will also receive 100 percent of the average employment payment. They will also be entitled to a 50 percent contribution if they complete 15 hours of driving.
Prop 22 also assures independent contractors of 30 cents per mile during a trip and 120 percent of the minimum wage while they’re still at work.
Pros for the app-based companies
Companies contracting gig workers will scale up their operations by employing hundreds of workers without worrying about full-time employees’ benefits. Prop 22 protects these businesses from further action by gig workers; it will be nearly impossible for independent contractors to reverse the new legislation. It’ll require a supermajority to turn back the tide.
Prop 22 opponents
Although Uber, Lyft, and others hailed Prop 22 as a victorious regulation and a game-changer for the gig economy, some gig workers and Amnesty International fiercely oppose it.
Independent contractors belonging to Gig Workers Rising argue that Prop 22 falls short as it’ll continue paying workers a pittance leading to sub-standard living conditions.
Amnesty International points out that these businesses used their financial prowess and leverage to shape regulations and take advantage of workers. Prop 22 will further erode independent contractors’ rights as they have been left at the mercy of powerful businesses.
App-based companies won in the 2020 November election as Prop 22 passed with more than 50 %. While the new legislation claims to be in the best interests of workers and perfectly fits the companies’ business model, it remains to be seen to what extent it would make gig workers’ lives better. Some sections of society still believe AB5 was the better alternative. However, what’s clear is that California Prop22 victory will have far-reaching effects on other states thinking of enacting laws similar to AB5.