Prop. 22 Asks: Should App-Based Drivers Be Classified as Contractors Instead of Employees? (Transcript)

Proposition 22 asks Californians if they want to define app-based transportation and delivery drivers as independent contractors, instead of as employees, as state law currently requires. This is an industry-specific carve-out. This episode is part of our Bay Curious Prop Fest series, which explores the 12 propositions on California’s ballot. The series runs from Oct. 1-16, with new episodes dropping every weekday.

Transcript

Olivia Allen-Price [00:00:00] I’m Olivia Allen-Price . You’re listening to Bay Curious Prop Fest.

Olivia Allen-Price [00:00:05] It’s the most expensive ballot measure in California history, Proposition 22 . Or, as you might be calling it, that one about Uber and Lyft.

Lyft driver [00:00:15] I like the flexibility of driving whenever you want. Having your own schedule.

Uber driver [00:00:20] We want to be independent contractors, but Uber doesn’t treat us like independent contractors. We’re not able to set our rates.

Lyft driver <[00:00:26] Right now, I’m going to school. As my part-time gig to make money I’m doing Lyft.

Uber driver [00:00:31] We’re not able to work when we want to, we pretty much have to work when we have to, in order to make money.

Olivia Allen-Price [00:00:38] How should app based drivers be classified? As employees or contractors? Prop 22 asks the public to decide. Today in the show we’ll unpack what difference those classifications make and learn how Prop 22 could impact the future of work.

Olivia Allen-Price [00:01:02] KQED reporter Sam Harnett has been covering these gig apps for years now and is here to walk us through Prop 22. Welcome, Sam.

Sam Harnett [00:01:09] Hello, Olivia.

Olivia Allen-Price [00:01:10] So I know there’s a lot of layers to this one and we’re gonna get into all of those, but give us first a brief break down, what would Prop 22 do? What are we voting on?

Sam Harnett [00:01:19] So at the highest level, Proposition 22 would exempt a handful of gig app companies like Uber, Lyft and Instacart from California state labor law. And it would allow those companies to continue classifying their drivers as contractors.

Olivia Allen-Price [00:01:33] And the issue of whether app based drivers, you know, should be considered employees or independent contractors, it really goes back to sort of the beginning of when these apps kind of first came out. What’s going on?

Sam Harnett [00:01:45] Sure. So if you go back to the beginning of Uber and Lyft in 2012, they started using this labor model where they, they classified their workers as contractors, which means they don’t pay unemployment insurance, they don’t have to pay overtime, they don’t pay workers comp. They have way less liability if there’s an accident. The whole business model is built on this contractor status, which was legally suspect from the start. So there are lawsuits right in the beginning against these companies, but the companies prevailed and they were able to keep classifying their workers as contractors.

Sam Harnett [00:02:11] Then in 2018, the California Supreme Court came in and they issued what’s called The Dynamex Decision, which actually wasn’t about the gig companies, it was about this independent trucking company that was classifying workers as contractors. But anyway, it made it harder for companies to classify workers as contractors. So in 2018, a lot people thought, OK, now these companies are going to change and start classifying workers as employees. But the companies didn’t.

Sam Harnett [00:02:34] So, the legislature in 2019 passed a law called AB 5, which just codified into law the California Supreme Court dynamic’s decision. That became a law in 2020, and a lot people thought, OK, now, Uber, Lyft and InstaCart, they’re going to classify their workers as employees. But the companies didn’t. So then the pandemic happens, suddenly you’ve got tens or hundreds of thousands of workers for these apps that are out of work, but they can’t collect unemployment because the companies never paid into the state unemployment fund. So then you had the California attorney general step in, and a bunch of city attorneys, and they sued Uber and Lyft. This was back in May. And they sued them saying, hey, listen, you’re you’re still misclassifying your workers. Meanwhile, Uber, Lyft, Instacart, Postmates and a bunch of the other gig apps put Proposition 22 on the ballot. And they’re betting like, OK, if we can get the voters to pass this proposition, then we can keep operating as, as we were before.

Olivia Allen-Price [00:03:27] Can you explain a little bit more thoroughly like what is the difference effectively between an employee and an independent contractor?

Sam Harnett [00:03:34] In America the only way to get basic protections like unemployment insurance, guaranteed minimum wage, overtime, workers compensation, is to be an employee. If you’re a contractor, you don’t get any of those protections. That’s essentially the difference. Really, the contractor was supposed to be for kind of professionals who were making a ton of money and were deciding to be a contractor because they wanted to, not because they were being forced to be a contractor. But corporations saw that, hey, with this contractor model, we can get out of paying for all these employee benefits and protections, and it’s way, way cheaper. So over the last, you know, since the late 70s, companies have been pushing more and more workers from employees into contractor status. It’s really just about do you get guaranteed employee protections or not?

Olivia Allen-Price [00:04:19] OK. And can we get into, like, a little bit the nitty gritty of 22 – what would really change.

Sam Harnett [00:04:25] So Proposition 22 is a carve out for select companies. And the carve out is for companies that do transportation or delivery through apps. And if a company fits that description, that means they can classify their workers as contractors.

Olivia Allen-Price [00:04:39] And this isn’t just like Uber and Lyft, which is what I think people immediately think of, but also like delivery, like DoorDash, Instacart,.

Sam Harnett [00:04:46] PostMates.

Olivia Allen-Price [00:04:47] Anyone who is in a car.

Sam Harnett [00:04:48] Yeah. Through an app, on a car, on a bike, doing delivery or transportation.

Olivia Allen-Price [00:04:53] OK.

Sam Harnett [00:04:53] The proposition then also has a couple increase perks or benefits for contractors. They can get health subsidies if they drive a certain amount. They can get limited insurance. They also, it says Iike a minimum floor for pay, but the minimum pay is calculated based on engaged hours – this is a really important difference. So it’s 120% of minimum wage is going to be guaranteed, but that’s only while you’re actually engaged in the app.

Sam Harnett [00:05:17] So that means if you’re driving for Uber and let’s say you don’t get a ride for an hour, well, you don’t get paid for that hour of driving around even though you were working. So that’s like a really important kind of distinction. And I guess, the thing with Proposition 22 is, it’s all – it all gets very complicated in the details, but basically, if you look at the package, it’s going to guarantee a slight improvement to the benefits and protections for the contractors, but it’s far short of what you’d get in employee status.

Olivia Allen-Price [00:05:42] Could other industries be impacted if this passes.

Sam Harnett [00:05:45] It creates this sort of third category that you can bet that corporations are going to go for because they can see a way to make money. And if you remember, Uber and Lyft, you know, started the gig app trend, but Instacart, PostMates, DoorDash, all these companies followed Uber and Lyft by creating apps to create more jobs that were contractor and not employee. So, you can bet that a lot of other industries, if they can figure out a way, you know, if trucking can get on an app, you know, maybe there’s a way to have warehouse workers work through an app. This opens the door for more companies to try to find ways to fit this model because contractors are way cheaper than employees.

Olivia Allen-Price [00:06:24] Now, what are these companies like Uber, Lyft, Instacart, DoorDash, etc., what are their arguments for why people should vote for 22?

Sam Harnett [00:06:32] I’d say their primary argument is: This will allow us to keep operating as we were operating. It’s basically a pitch to consumers saying, hey, you know, you liked Uber and Lyft and Instacart and DoorSash. The second argument they make is, you know, listen, people need work right now, and so you can get work through these apps. We just want to give people work. And it’s not our fault that America doesn’t have a real safety net. It’s not our fault that it’s really hard to make it in this country, even if you’re working full-time. The anti side is saying, listen, if you allow these corporations to provide this kind of subpar, substandard work, you’re going to erode more of the good jobs that we do have. And you’re going to see more and more companies following Uber, Lyft, Instacart down this app route, which means you’re going to have more inequality and you’re going to have less good jobs.

Olivia Allen-Price [00:07:14] I’ve seen a lot of arguments that these companies will stop operating in California if this law doesn’t pass. Is that a risk here?

Sam Harnett [00:07:22] Well, Uber definitely made it clear that they would temporarily pull out of California. But it’s important to remember that Uber, Lyft and other gig companies have threatened to leave whenever they didn’t like a regulation in multiple cities and states across the country. In Austin, in New York City, in Chicago and Seattle, and they always came back. In all of those cases, Uber and Lyft would temporarily leave until the regulation was changed back in their favor and then they return.

Sam Harnett [00:07:48] Now, if you look at California, you know, I think what, Olivia, we’re like the fifth biggest economy in the world. Right? The idea that they would pull out of California forever, it just doesn’t seem very feasible, given how big of a market that they are now.

Olivia Allen-Price [00:08:01] Sort of another sort of, I guess, argument that I’ve seen out there is not just, OK, we might pull out of California, but also if we have to make everyone employees, fewer people will be able to drive for us because of the additional cost of making them employees. Could we see drivers potentially lose out on opportunity here if this were to fail?

Sam Harnett [00:08:24] Uber, Lyft, DoorDash, shifting to employee status is definitely gonna force them to change their business model. They’re going to have to do things a little differently, and that might mean they have fewer drivers who then drive more hours. And so some very casual drivers might lose out.

Olivia Allen-Price [00:08:39] Drivers using these apps come down on both sides of Prop 22. Supporters are worried that becoming employees could ultimately take away their flexible work schedules or cause job losses. They also say rates could go up for consumers and service could disappear from lower profit regions. Drivers voting against Prop 22 want the protections that they would get as an employee. They argue a company shouldn’t get to write their own labor laws. They also point out that Prop 22 would be difficult to amend or overturn, requiring a 7/8 vote in the California state legislature or another proposition on a feature ballot.

Olivia Allen-Price [00:09:19] The campaign financing on this one is bonkers. What does the money situation look like?

Sam Harnett [00:09:23] Right. So on the pro side, I mean, the people who want this proposition, it’s mainly the gig companies. Over 181 million dollars. The most on a California proposition. And if you’re watching TV right now, you’re probably seeing the ads. I mean, they are flooding the airwaves. On the against side, it’s mostly labor, and they’ve got about 10 million dollars. So it’s an 18 to 1 disparity between the funding.

Olivia Allen-Price [00:09:47] Well, Sam Harnett, KQED, Silicon Valley reporter, thanks.

Sam Harnett [00:09:50] Thanks, Olivia.

Olivia Allen-Price [00:09:52] To put a cap on this one, a vote yes says you think app based driving services should be treated differently from other industries and be allowed to classify their workers as independent contractors rather than employees. A no vote means you think app based driving services should follow the regulations set out by our existing law.

Olivia Allen-Price [00:10:14] Bay Curious Prop Fest is produced by Katrina Schwartz, Rob Speight, Katie McMurran and me, Olivia Allen-Price, with a huge assist from the entire KQED newsroom. Our show is made in San Francisco at member supported KQED. We’ll be back tomorrow with an episode on Prop 23, the dialysis prop. See you then.