California recently amended its Labor Code to protect so-called gig economy workers and mandated that those workers be classified as “employees” as opposed to “independent contractors.” See Cal. Lab. Code, §2750.3. This new law codified the ABC Test that was adopted by Dynamex Operations West v. Superior Court, 4 Cal.5th 903 (Cal. Supreme Court 2018). The distinction between “employee” and “independent contractor” matters since “employees” are entitled to various legal protections such as minimum wage, rest and meal breaks, the right to workers’ compensation, and other protections, while independent contractors are not.

However, companies like Uber, Lyft and DoorDash are backing a new ballot measure that would exempt their workers from the new law. All three companies use gig workers as the main component of their respective workforces. Having to pay overtime, minimum wage, provide reimbursements, workers’ compensation, and meal and rest breaks will significantly increase their labor costs. This will decrease profitability and will increase costs to consumers. As such, the companies and others are backing the initiative to appear on the ballot in November 2020 which would exempt “app-based transportation and delivery drivers” from the new law. The exemption would apply if:

• The work is not unduly controlled by the app-based network service providers — for example, the companies cannot mandate driving schedules, minimum hours, or mandate that the drivers accept any specific driveshare or delivery request
• The drivers are allowed to provide services to any and all rideshare/delivery app-based network service providers
• The drivers are not restricted from engaging in other occupations or businesses

In addition, the ballot initiative would provide for some “employee-like” protections to these drivers including:

• A minimum wage of $18 an hour (120% of the state minimum wage)
• Fuel and vehicle maintenance reimbursement at 30 cents per mile
• Payments for healthcare for some drivers
• Paid accident insurance coverage
• And more

Finally, the ballot initiative would mandate certain regulations of the drivers. That these regulations would be imposed by law is important so that it is not the companies controlling the drivers, but legal regulations. This avoids the potential for plaintiffs’ lawyers to use these factors as an argument that the drivers are really “employees” not “independent contractors. The legally mandated requirements would be:

• Recurring background checks
• Mandatory safety training
• Limits on the number of hours a driver can drive
• Application of strict no-driving while under the influence of drug and alcohol and removal of drivers for violations

As of the time of this writing, the ballot initiative has not received enough voter signatures to appear on the ballot next November. However, the coalition has pledged over $100 million dollars to the effort and, odds are that the initiative will go to the voters.

Of course, there is already intense opposition to the initiative. San Diego Assemblywoman, Lorena Gonzalez (D, San Diego), who introduced and authored AB 5, has publicly denounced the initiative. As reported, she is opposing the initiative and has charged that “these billion-dollar corporations still refuse to offer their workers what every other employee in California is entitled to: earning the minimum wage for all hours worked, social security, normal reimbursements for their costs, overtime pay, and the right to organize.” Drivers have also weighed in, noting that the companies are spending millions to back an initiative rather than using that money to pay their drivers.

Call San Diego Corporate Law Today

For more information, call corporate attorney Michael Leonard, Esq. of San Diego Corporate Law.  Mr. Leonard has been named as “Best of the Bar” by the San Diego Business Journal for the last four years. Mr. Leonard has extensive experience in drafting employee policies, employee handbooks, employment contracts, and all other contracts and agreements necessary for running your business. Mr. Leonard can be reached at (858) 483-9200 or via email. Like us on Facebook.

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