California Proposition 22 and non-driving independent contractors

In case you haven’t heard, Tuesday was an election day in the state of California, and throughout the rest of the United States. There were a number of candidates and propositions on ballots throughout the country, but for this post I’m going to concentrate on a single California proposition, Proposition 22.

By Alexander Torrenegra from Secaucus, NJ (New York Metro), United States – On my first @Uber ride in Bogota heading to a Startup Weekend. Priceless easiness and safety. I love disruptive innovation., CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=37982760

In ballot legalese, this proposition’s title was “EXEMPTS APP-BASED TRANSPORTATION AND DELIVERY COMPANIES FROM PROVIDING EMPLOYEE BENEFITS TO CERTAIN DRIVERS. INITIATIVE STATUTE.” What that means is that if the proposition passes, drivers for “app-based transportation and delivery companies” (think Uber, Lyft, DoorDash, etc.) will be exempted from the provisions of California’s Assembly Bill 5, and therefore will NOT be classified as employees.

And for the record, it looks like Proposition 22 has passed.

However, Assembly Bill 5 still applies to people who are NOT drivers for app-based transportation and delivery companies. Specifically, Assembly Bill 5 provides the following test to see whether a person is an employee or an independent contractor.

 Section 2750.3 is added to the Labor Code, to read:

 (a) (1) For purposes of the provisions of this code and the Unemployment Insurance Code, and for the wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity‚Äôs business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

When AB5 was passed, a lot of attention was focused on the need for companies to properly classify their workers as employees, when warranted.

But not a lot of attention was focused on the times when companies would PREFER to use independent contractors instead of hiring employees.

I’ll talk about that in a future post.