Opinion Mondays: California Voters Tell Elected Officials to Leave Their Ride-Sharing Alone
While many politicians and pundits are still trying to digest what did, or didn’t happened in the national election races, at least one state-level electoral preference was made abundantly clear. California voters overwhelmingly told their state legislators and their Governor to stop picking fights with Uber, Lift, Doordash, and other app-based business enterprises. In a rebuke to the Legislature, which last year passed Assembly Bill 5 and this year passed Assembly Bill 2257 (both discussed below), collectively designating app-based drivers as employees–not independent contractors–some 58.5% percent of Golden State voters, according to at least one financial news report, said “Yes” to Proposition 22, the voter initiative which generally exempts such drivers from being classified as employees.
The vote was also a resounding defeat for California labor groups, who quickly (and accurately) sniped that Proposition 22 had been the most expensive ballot-measure campaign in state history. Indeed, most pundits agree that Uber, Lyft, Instacart, and DoorDash collectively spent some $200m in election marketing. Opposing groups spent millions as well, although many fewer millions.
After Tuesday’s results, editorial desks at the Los Angeles Times and the New York Times were quick to say the people didn’t know what they were doing. How dare they act in such an unenlightened manner! After all, a piece in the National Law Review had earlier said the employment test promulgated by AB 5 was “Here to Stay.” Earlier this year, in a February 6, 2020 technology article, the Los Angeles Times had also breathlessly touted AB 5 as “a victory for drivers in the state, a predictable outcome of legislation that bolstered their legal rights.”
Drivers Didn’t Want “Protection”
Funny thing: the drivers didn’t see it that way. According to California’s official election information web site, in a posting before the Prop 22 vote, app-based drivers favored Proposition 22 [i.e., disfavored ABs 5 and 2257] by a margin of four to one. Of course, Uber/Lyft drivers usually aren’t as smart as newspaper folks. And yet it seems that, even in California, people grow weary of hearing the elite tell them that they should all just put their brains in neutral and do as they’re told. App-based drivers, and a significant majority of their neighbors chose not to do so, saying “Yes” to Prop 22, and “No” to AB 5 and AB 2257.
AB 5 Summary
Well, to what were they saying no? Effective for work performed on or after January 1, 2020, AB 5 essentially adopted a form of the so-called “ABC test” for determining if a worker is an independent contractor vis-a-vis an employee [for a general discussion of that and other tests, see Larson’s Workers’ Compensation Law, §§ 61.02, 61.03, 63.01, et seq.]. Under California’s version of the ABC test, a person providing labor or services for remuneration is considered an employee–and not an independent contractor–unless the hiring entity demonstrates that all of the following conditions are satisfied [emphasis mine]:
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’s 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.
AB 5’s Presumption of Employee Status
Under AB 5 (but before Prop 22), therefore, if one provided labor or services for pay, he or she was presumed to be an employee. In California, as in a number of other states, along with employee status comes a number of so-called “protections,” such as payment of a mandated minimum wage, provision of daily and weekly overtime pay, meal and rest breaks, reimbursement for certain necessary business expenses, provision for medical and disability benefits for work-related injuries, and a host of other things. Along with those protections comes, of course, a significantly greater degree of “employer” control.
AB 5 Codified California High Court’s Dynamex Decision
AB 5 essentially codified a decision of the Supreme Court of California [Dynamex Operations West, Inc. v. Superior Court of Los Angeles County (2018) 4 Cal. 5th 903, 416 P.3d 1, 232 Cal. Rptr. 3d 1, 83 Cal. Comp. Cases 817], a case that arose in the wage and hour context. Prior to Dynamex, California had utilized a fairly standard version of the common-law “control” test [see S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal. 3d 341, 769 P.2d 399, 256 Cal. Rptr. 543, 54 Cal. Comp. Cases 80. Even after AB 5, however, practitioners could not jettison their copies of Borello; that decision still applied to the many exceptions contained within AB 5’s fine print, and my, my, there were a host of exemptions.
Reaction to AB 5 Was Quick and Loud
The public’s reaction to AB 5 was stunning and loud. Criticism came from a host of groups. Not only did app-based firms, such as Uber and Lyft cry foul, but other “traditional” businesses, including many within the publishing and entertainment industries, and those in the trucking industry, whose workers traditionally have been classified in California as independent contractors, signaled that they might have to lay off significant numbers of workers under the new law. Business contraction due to COVID-19 added to the crescendo.
Enter AB 2257 Stage Right
To tamp down the crowd, with tacit admission that Uber and Lyft had been the targets all along, on August 31, the Legislature passed AB 2257, with “urgency added” (a special California legislative designation). Signed by Governor Newsom on September 4, the emergency bill became effective immediately. It exempted scores of worker categories from AB 5, including freelance writers, photographers, videographers, photo editors, illustrators, journalists, individual musicians, the recording industry, and unions representing musicians and artists. In total, according to a report in the National Law Journal, AB 2257 exempted 109 categories of workers AB 5’s ABC test.
AB 2257, Not Prop 22, Was the “Carve Out”
And so, with splendid irony, the California Legislature (with the consent of the Governor) turned pithy AB 5–which used a mere 130 words to craft the ABC test–on its head. AB 2257 contained 3,500 words, detailing the exceptions. In a real sense, the exceptions became the rule. As I have argued on a number of occasions with several California colleagues, contrary to a host of slanted news reports and industry white papers, the backdrop of AB 5 and AB 2257 wasn’t a determination to regulate the gig economy; they regulated a few companies in part of the gig economy. While there were certainly some exceptions, virtually speaking, after AB 2257, the only workers who came within the crosshairs of the ABC test were those who worked for Uber/Lyft, Doordash and the like.
The gig economy is not synonymous with Uber/Lyft; it has literally been around for decades, if not centuries. This can be seen in all the special groups whose interests resulted in an exception to employee status under AB 5. Which brings up another point: the news reports and opinion pieces that described Prop 22 as a “carve out” to favor Uber, Lyft, and others were disingenuous. AB 5 was the carve out. If that isn’t patently the case, why did it need 3,500 words to specify who wasn’t covered by the generosity of the ABC test?
State of California Also Sought Injunctive Relief
If anyone questioned who the real targets of the ABC test had been, it became abundantly clear earlier this year when the California Attorney General filed suit against Uber, Lyft, and others firms, contending that they had continued their improper practices of designating their employees as independent contractors [see People v. Uber Technologies, Inc., et al., City & County of San Francisco, Super Ct. No. CGC-20-584402]. The trial court granted injunctive relief to the state and, on October 22, 2020, the Proposition 22 stage was clearly set with a decision from the Court of Appeal of California, First Appellate District, Division Four, that concluded the trial court had acted within its discretion in granting the injunction.
A Story From Real Life
I have a close friend–let’s call him David–whom I have known well for more than 50 years. He’s in his mid-sixties, lives alone in a small town in South Carolina (population about 30K), not too far from a larger “city” (population 70K). He’s extremely articulate, yet quiet. And oh, I need to mention this: two years ago, he suffered a moderate stroke that left him with diminished strength and feeling in his left arm below the elbow. Because he also has difficulties with his left leg, he must walk with a cane.
When David had his stroke, he was forced to retire. His needs are modest, and he lives on his Social Security income, supplement somewhat by a small 401K balance that provides precious little income in these days of low interest rates. A year and one half ago–six months into his “retirement”–he asked his doctor if it was safe for him to drive. The physician responded, “Yes, of course.”
David then inquired if the doctor thought he could drive for Uber (David has a nice, though modest, sedan). The doctor again said, “Yes.” In fact, said the physician, “The interpersonal activity will do you good.”
David decided to give it a try. Working no more than 4 hours per day and no more than 4 days each week, David earned some $25K during 2019. There are only a half dozen or so Uber drivers in his home town–plenty of rides to share among the small group. David, who likes to sleep in, and who knows that one of the other drivers is a young mother who can only drive from 7:00 a.m. to 9:00 a.m., before she goes to work at a grocery store, doesn’t turn his own app on until at least 10:00.
David utilizes his app when he wants; he leaves it off if he has something else that he wants to do. He enjoys the conversations and the extra income. A few months ago, during the middle of the COVID-19 scare, I asked him if he still drove for Uber. He said, “Sure. I’ve got plenty of masks. And Tom, what else am I going to do, play golf or tennis?”
Without Prop 22, California Would Tax David $25K Annually
If David lived in California, and if Uber/Lyft’s threats of closing down their California operations in the face of AB 5’s ABC test were accurate–and I think they were–the combination of “protections” afforded my friend, David, by California’s Legislature, consented to by its Governor, would have amounted essentially to an annual tax of $25K on David, since that’s the amount he would lose if he couldn’t drive for Uber.
David doesn’t consider himself to be an employee of Uber. As I mentioned above, he comes and goes when he wants. If he wants to take a few days off, he doesn’t need anyone’s permission. If he doesn’t feel like accepting a customer because he’d rather not drive to the larger city nearby, that’s fine with Uber.
The citizens of South Carolina agree with David; he isn’t anyone’s employee. He’s an independent contractor, who must buy his own car, his own gas, pay for his own insurance, but someone who can set his own hours and work week. And after last Tuesday, the citizens of California made it clear that they agree with their cousins in the Carolinas.
Gee, the folks in California agree with the folks in South Carolina on at least this issue. Maybe that’s a start!