September 30, 2020

From its debut, Assembly Bill 5 (“AB5″) received harsh criticism from workers in the “gig economy,” especially from app-based drivers. In response to this criticism, California legislature passed Assembly Bill 2257 (“AB2257″), which granted several exemptions to the classification of “employee” under AB5. However, these exemptions did not include app-based drivers for industries such as Uber, Lyft, and DoorDash.

For information on AB5 and AB2257, please read our article Employee vs. Independent Contractor in California.

Involving the Courts
In December 2019, Uber, Postmates, and several other app-based driving companies sued the State of California for passing AB5. The complaint alleged the new bill allowed for nonsensical exemptions for other industries, but did not carve out a section for app-based drivers. The complaint asked the court to find AB5 unconstitutional, unenforceable, and to enter an injunction enjoining defendants from taking any action to enforce AB5. Plaintiffs did not win their lawsuit, and AB5 became effective law on January 1, 2020. Regardless of the new law, app-based driving companies did not reclassify their drivers as employees in consideration of AB5.

In May 2020, California Attorney General Xavier Becerra sued both Uber and Lyft for misclassification of drivers in the San Francisco Superior Court. The suit alleged Uber and Lyft denied its drivers benefits and protections by classifying them as independent contractors, including a right to minimum wage, overtime pay, reimbursement for business expenses, and access to unemployment and disability.

In August 2020, Judge Ethan Schulman granted a preliminary injunction, blocking the app-based companies from classifying drivers as independent contractors. Judge Schulman gave the companies a 10-day stay, during which the injunction would not force compliance with AB5, to give the companies the opportunity to correctly classify. Both Uber and Lyft appealed the decision, and the judge blocked the order until October 13, 2020, until oral arguments could be made.

Prior to the judge’s decision, both Uber and Lyft threatened to suspend all services in California. App-based driving companies are not depending on the results of this case, and have contributed millions for a proposition that will be on the November ballot.

Proposition 22
The November ballot will put to vote the classification of app-based drivers. This proposition is a direct response to AB5, which required companies to reclassify drivers as employees. Proposition 22, formerly known as the App-Based Drivers as Contractors and Labor Policies Initiative, plans to grant app-based drivers an exemption under AB5, allowing the drivers to be classified as independent contractors. As of September 30, 2020, the campaign finance reports for the proposition show $180 million in contribution toward the bill, making it the most expensive ballot measure in California history. If Proposition 22 passes, it will override AB5 regarding only the question of app-based drivers.

Proponents for the proposition hope to define app-based drivers as independent contractors. This would then lead to labor and wage policies specific to app-based drivers. Opponents of the proposition would like to define employers and independent contractors under the ABC test codified in AB5, and do not want there to be exemptions for certain large companies, while small employers are required to follow the previous law under AB5.

If passed, Proposition 22 would define app-based drivers as those who

(a) provide delivery services on an on-demand basis through a business’s online-enabled application or platform; or
(b) use a personal vehicle to provide prearranged transportation services for compensation via a business’s online-enabled application or platform.

The largest proponents of Proposition 22 have been Uber, Lyft and DoorDash.

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This article is based on the law as of the date posted at the top of the article. This article does not constitute the provision of legal advice, and does not by itself create an attorney-client relationship with Eskridge Law.