The California Supreme Court this week heard oral arguments in a lawsuit challenging Proposition 22, a 2020 ballot initiative that classifies app-based drivers for rideshare and food delivery companies as independent contractors rather than employees.
An appeals court held last year that the measure, which was passed by more than 60% of California voters, does not violate the state’s constitution, giving app-based rideshare companies such as Uber and Lyft a legal victory. The Service Employees International Union and individual rideshare drivers then appealed the decision to the state’s high court, arguing that the current exclusion of gig drivers from state workers’ compensation coverage violates state constitutional provisions.
The group Protect App-Based Drivers and Services (PADS), which was formerly the “Yes on Prop 22” coalition, expressed confidence that the court would uphold the ballot initiative.
“We believe that the law is very clear and that the will of the people should be upheld, once and for all,” Kurt Oneto, the PADS counsel, said in a prepared statement. “We are confident that the California Supreme Court will do the right thing.”
The passage of Proposition 22 followed the state legislature's passage of Assembly Bill 5, which limited the power of employers to classify workers as independent contractors. AB 5 was a move to turn most workers into W-2 employees, according to Christopher Thornberg, an economist and founder of Los Angeles-based Beacon Economics LLC, a research and consulting firm.
Uber and Lyft at the time were under attack by organized labor and accused of exploiting workers and paying subminimum wages, Thornberg told Flexible Work News. Those accusations were ludicrous, he added.
“These are voluntary jobs,” Thornberg said of the driving opportunities offered by rideshare companies. “There has been this weird drift toward this fantasyland that people have no choice and somehow or other they are forced to work for these companies. That is completely nonsensical.”
A study published by the Center for Economic Forecasting & Development at the University of California, Riverside, in 2022 concluded that gross app-based driver earnings in all of the state’s metropolitan areas exceeded $30 per hour and that more than 82% of the drivers were satisfied with their work.
Most drivers are otherwise employed and use the flexibility of the app-based work to supplement their incomes in their free time, the study states.
“The nature of the system is basically giving people an opportunity to do something with their leftover time other than watching reruns of ‘Friends,’” Thornberg said. “This would be an opportunity to earn a little extra money on the side with relatively little effort.”
The growth of these types of gig-economy jobs—which reached nearly 1.4 million in California in 2021—is also not causing a decline in traditional payroll employment, he said. The number of W-2 jobs in the state has never been higher, according to Thornberg.
“There is no evidence of an army of exploited part-time workers out there,” he said. “There’s no data to support that vision of the world.”
Low-income workers in particular benefit from the gig-economy jobs because they are able to earn extra money on the side based on their own schedules, according to Thornberg. A ruling that Prop 22 is unconstitutional would lead to a reduction in this type of work throughout California and make rideshare services more expensive, he said, adding that fewer people in low-income neighborhoods would be able to take advantage of such services.
Liya Palagashvilli, an economist at the Mercatus Center at George Mason University, recently told a Massachusetts legislative committee that the passage of AB 5 did not result in a large number of contract workers becoming regular employees.
“Contrary to the goals of the lawmakers, we found no consistent evidence that traditional (W-2) employment increased for affected occupations in California post-AB 5,” Palagashvilli said. “Instead, we found that AB 5 is associated with a significant decline in self-employment and overall employment for affected occupations in California.”
Thornberg emphasized that organized labor in California has opposed Prop 22 due to the nontraditional nature of the gig-economy jobs.
“They don’t like the kind of systems that are occurring outside of the regulatory structures of employment,” he said. “... The idea of Uber and Lyft giving people self-choice, that smacks them as dangerous.”