The measure exempts app-based, on-demand companies from California labor law and keeps gig workers classified as independent contractors instead of employees. Ride-hailing drivers and app-based. The bill, which passed 29-11, already included carveouts for a range of industries — but not for gig-reliant businesses, which are expected to be most impacted by the new law. On January 1, a law went into effect in California known as AB5 that is intended to reclassify many of the state's independent contractors as regular employees and give them the workplace benefits. California has overreached in its effort to address the challenges in today's tech platform gig-work economy. The live music sector, the progenitor of the term 'gig' work, is being swept up by this law. The irony would be comical if it were not such a serious problem. California's Historic AB5 Gig-Worker Law California law (AB5) changes the rules for how employers determine whether a worker is an employee or independent contractor. By Stephen Fishman, J.D.
- Vox Media is laying off hundreds of freelance workers as California's gig economy rights bill takes effect.
- Vox cheered for the gig economy bill on its own news pages. Now it's letting freelance workers go because of the new law.
- This is a painfully ironic, cautionary tale against the broader labor movement represented by politicians like Sen. Elizabeth Warren.
California AB-5 takes effect in 2020 after passage by the California state Senate in September. The bill targets the very business model that has grown companies like Uber, Lyft, and DoorDash into a booming gig economy.
The bill requires these companies to reclassify much of their freelance workforce as employees, and provide benefits like minimum wage, paid time off, and health insurance. But it's already cutting off hard-working freelancers from flexible work opportunities.
Vox Media Lays Off Hundreds of California Bloggers
Rideshare giants like Uber and Lyft opposed AB-5. But their workers aren't the only ones affected by the new law. online, freelancers working to boost their income are the first casualties of California's new gig economy bill.
They used to be able to work flexible hours writing about something they love. Now they can't. Vox Media's sports blogging network, SB Nation, is laying off hundreds of California freelance sports bloggers:
This shift is part of a business and staffing strategy that we have been exploring over the past two years, but one that is also necessary in light of California's new independent contractor law, which goes into effect January 1, 2020.
Vox says the new law makes it impossible for the digital media company to keep paying part-time bloggers. It restricts contractors from producing more than 35 articles a year. Vox has cut out hundreds of flex positions, to be replaced with just 12 full-time jobs.
Flashback: Vox Championed the Gig Economy Laws
Left-leaning Vox has long been supportive of AB-5.
In July, Vox chastised Democratic presidential candidates for not boosting AB-5 from the national debate stage. As the bill neared a final vote, Vox's Recode vertical listed off the pros, with no mention of the cons.
After its passage, Vox hailed AB-5 as 'a victory for workers everywhere.' But within a month of AB-5's passage, LA area Uber drivers reported a drastic plunge in surge bonuses. Rideshare drivers are also worried that they'll soon be confined to working approved shifts instead of flexible work schedules, a major draw for residents looking to boost their incomes.
Elizabeth Warren & Labor Activists Don't Understand the Economy
Sen. Elizabeth Warren also penned an op-ed backing the bill:
All Democrats need to stand up and say, without hedging, that we support AB 5 and back full employee status for gig workers.
But the immediate fallout from AB-5 shows the hazard in the labor movement's approach to helping workers. Over the weekend, Warren called out JPMorgan CEO Jamie Dimon for advocating that corporations take voluntary steps to be socially responsible:
They'll say they're going to do it on their own, they may make some adjustments. But understand this: There's a reason you put laws in place. Because the one who doesn't follow voluntarily is the one who then gets a little short-term comparative advantage, gets to boost the share price just a little bit.
California Gig Law Musicians
Elizabeth Warren and the labor movement don't seem to understand that this same cutthroat competition takes effect when laws are in place too. Any law that disadvantages a corporation pressures it to squeeze the difference out of its workers.
Progressives don't believe profits 'trickle down.' Why is it so hard for them to believe that costs do?
On November 3, 2020, California voters passed ballot initiative Proposition 22, the so-called California gig worker law, which, effective January 1, 2021, will exempt app-based transportation and delivery companies such as Uber, Lyft, and Door Dash from providing employee benefits to certain drivers. At the same time, Proposition 22 will enact certain wage and labor policies specific to app-based drivers and companies. Essentially, Proposition 22 creates a new type of worker, an independent contractor that enjoys certain similar benefits and protections afforded to employees. This post provides an overview of the new California gig worker law.
California Proposition 22 Overview:
/cdn.vox-cdn.com/uploads/chorus_image/image/65222101/akrales_181010_3013_0065.0.jpg "California Gig Law")
Minimum Earnings Threshold
Proposition 22 entitles app-based drivers to a minimum earnings threshold. The minimum earnings threshold is 120% of the minimum wage (applied to a driver's 'engaged' time) plus an additional $0.30/engaged mile (to be adjusted for inflation). 'Engaged' time is the time between a driver accepting a service request and completing the request.
Vox says the new law makes it impossible for the digital media company to keep paying part-time bloggers. It restricts contractors from producing more than 35 articles a year. Vox has cut out hundreds of flex positions, to be replaced with just 12 full-time jobs.
Flashback: Vox Championed the Gig Economy Laws
Left-leaning Vox has long been supportive of AB-5.
In July, Vox chastised Democratic presidential candidates for not boosting AB-5 from the national debate stage. As the bill neared a final vote, Vox's Recode vertical listed off the pros, with no mention of the cons.
After its passage, Vox hailed AB-5 as 'a victory for workers everywhere.' But within a month of AB-5's passage, LA area Uber drivers reported a drastic plunge in surge bonuses. Rideshare drivers are also worried that they'll soon be confined to working approved shifts instead of flexible work schedules, a major draw for residents looking to boost their incomes.
Elizabeth Warren & Labor Activists Don't Understand the Economy
Sen. Elizabeth Warren also penned an op-ed backing the bill:
All Democrats need to stand up and say, without hedging, that we support AB 5 and back full employee status for gig workers.
But the immediate fallout from AB-5 shows the hazard in the labor movement's approach to helping workers. Over the weekend, Warren called out JPMorgan CEO Jamie Dimon for advocating that corporations take voluntary steps to be socially responsible:
They'll say they're going to do it on their own, they may make some adjustments. But understand this: There's a reason you put laws in place. Because the one who doesn't follow voluntarily is the one who then gets a little short-term comparative advantage, gets to boost the share price just a little bit.
California Gig Law Musicians
Elizabeth Warren and the labor movement don't seem to understand that this same cutthroat competition takes effect when laws are in place too. Any law that disadvantages a corporation pressures it to squeeze the difference out of its workers.
Progressives don't believe profits 'trickle down.' Why is it so hard for them to believe that costs do?
On November 3, 2020, California voters passed ballot initiative Proposition 22, the so-called California gig worker law, which, effective January 1, 2021, will exempt app-based transportation and delivery companies such as Uber, Lyft, and Door Dash from providing employee benefits to certain drivers. At the same time, Proposition 22 will enact certain wage and labor policies specific to app-based drivers and companies. Essentially, Proposition 22 creates a new type of worker, an independent contractor that enjoys certain similar benefits and protections afforded to employees. This post provides an overview of the new California gig worker law.
California Proposition 22 Overview:
Minimum Earnings Threshold
Proposition 22 entitles app-based drivers to a minimum earnings threshold. The minimum earnings threshold is 120% of the minimum wage (applied to a driver's 'engaged' time) plus an additional $0.30/engaged mile (to be adjusted for inflation). 'Engaged' time is the time between a driver accepting a service request and completing the request.
Hour Limitations
Under the new California gig worker law, app-based drivers cannot work more than 12 hours during a 24-hour period without logging off for an uninterrupted 6 hours.
Healthcare Subsidies
With the new gig worker law, companies must provide healthcare subsidies equal to 82% of the average California Covered (CC) premium for each month. This subsidy applies to drivers who average at least 25 hours per week of engaged time during a calendar quarter. Companies provide healthcare subsidies equal to 41% of the CC premium each month for drivers that average between 15 and 25 hours of engaged time per week during a calendar quarter.
Occupational Accident Insurance
Proposition 22 requires companies to provide or make available occupational accident insurance. The insurance must cover at least $1 million in medical expenses and lost income resulting from injuries suffered while a driver is 'online.' Online is defined as the time where a driver is using the app/is eligible to receive service requests but not when engaged in personal activities. The insurance provides disability payments equal to 66% of a driver's average weekly earnings during the previous four weeks before suffering injuries while online. The disability payments can last 104 weeks (or two years).
Accidental Death Insurance
Under the new California gig worker law, companies provide or make available accidental death insurance for the benefit of a driver's spouse, children, or other dependents when the driver dies while using the app.
California Gig Law Reddit
Additional California Proposition 22 Policies
In addition, California's new gig worker law also requires companies to establish a variety of other programs and policies. Such as:
- Anti-discrimination and sexual harassment policies.
- Training programs for drivers related to driving, traffic, and accident avoidance.
- Recognizing and reporting sexual assault and misconduct.
- Zero-tolerance policies for driving under the influence of drugs or alcohol.
- Criminal background checks for drivers.
Further, Proposition 22 criminalizes false impersonation of an app-based driver, classifying it as a misdemeanor.
California Gig Worker Law Hybrid Status
in effect, Proposition 22 creates a hybrid worker, potentially allowing companies and workers the best of both worlds. The new law guarantees baseline compensation and benefits while maintaining freedom and flexibility. While companies are required to provide certain benefits, they are not required to provide full-time benefits to gig workers who companies have little to no control over. This is a promising development for gig workers. Other industries as well as companies in other states are paying close attention to the effects of Proposition 22. Some have already analyzed how a similar arrangement could benefit themselves and their workers.
Washington State Gig Worker Laws
Washington State does not yet have a gig worker classification structure. It is important to classify workers correctly. Penalties for misclassifying an independent contractor who is actually an employee could be significant. Foundry Law Group has previously written about factors to consider when classifying your workers. In addition, if you determine that someone you hired as an independent contractor is likely an employee, we have provided guidance on the necessary steps to reclassify that person as an employee.
California Gig Worker Law Resources
A legislative analysis of California's Proposition 22 can be found here.
The full text of California's Proposition 22 can be found here.
Contact Foundry Law Group
What Is California Gig Law
In many cases, deciding whether your worker is an independent contractor or an employee can be a confusing determination. Foundry Law Group is available and happy to assist with any questions you may have, please contact us for more information.
