Michael S. Kun, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Los Angeles office, was quoted in Material Handling & Logistics, in “California Vote Protects Ride Share Contractors,” by David Sparkman.

Following is an excerpt:

On Election Day, voters in California chose to dial back the state’s wholesale assault on independent contractors by restoring that status to ride share and delivery drivers.

The 58% to 43% vote approved Proposition 22, a referendum designed to remove ride share and delivery drivers from a state law severely restricting who could be considered independent contractors, called AB 5. The referendum was mounted by Uber, Lyft and DoorDash, who had been among the prime targets of the legislators who wrote the new law.

Last year the state legislature passed AB 5, which went into effect on January 1 of this year. Its ultimate effect was to virtually eliminate contractor status for a wide range of professions and occupations, including truck drivers. Courts stayed the law from going into effect in regard to truck drivers while legal challenges are pending. Trucking groups argue that the law violates federal law excluding this kind of state control over truckers in interstate commerce.

AB 5 law established a three-part “ABC” test for determining whether a worker was to be classified as an independent contractor or an employee, subject to all employment laws, including workers comp and unemployment insurance requirements.

The California ABC test holds that to be considered a contractor, the worker must be (A) free from control and direction of the hiring entity in connection with performing the work; (B) perform work outside the usual course of the hiring entity’s business; and (C) customarily engage in an independently established trade, occupation or business.

It is the “B” prong of the test that makes it impossible for many people who traditionally have been considered independent contractors, like truck drivers working for trucking companies, to continue enjoying that status.

The new law sparked much outrage among many independent contractors in the state who faced the immediate prospect of losing work. Earlier this year the state legislature voted to exclude a range of professions from the strictures of AB 5, including musicians, freelance writers, photographers, consultants, youth sports coaches and even comedians.

The Proposition 22 referendum stipulates that app-based ride share drivers:

  • Will be considered contractors unless the company they work for sets drivers’ hours, requires acceptance of specific ride or delivery requests, or restricts working for other companies.
  • Payments must be for the difference between a worker’s net earnings and a net earnings floor based on 120% of the minimum wage applied to a driver’s engaged time and 30 cents, adjusted for inflation after 2021, per engaged mile, but not for time spent waiting.
  • Drivers cannot work more than 12 hours during a 24-hour period, unless the driver has been logged off for an uninterrupted 6 hours.
  • Companies must provide monthly healthcare subsidies equal to 82% the California Covered (CC) premium for drivers who average at least 25 hours a week a quarter. Drivers averaging between 15 and 25 hours a week in a quarter get monthly healthcare subsidies equal to 41% the average CC premium.
  • In addition, the companies must provide healthcare subsidies for drivers who accumulate a minimum number of hours driving each quarter. Drivers also get occupational accident insurance and accidental death insurance.
  • The new law criminalizes the impersonation of drivers, a practice associated in the past with crimes ranging from robbery to rape.

Impact in Other States

Also required are training programs to teach drivers about how to drive safely in traffic, accident avoidance techniques and how to recognize and report sexual assault and misconduct. Companies must develop anti-discrimination and sexual harassment policies; zero-tolerance drug and alcohol policies; and are required to conduct criminal background checks of their drivers.

Under California law, the state legislature can only amend the new law if the changes are consistent with the Proposition’s purpose and if seven-eighths of lawmakers favor the amendment.

One of the ironies of the Proposition 22 victory is that ride share drivers, who the Teamsters have spent years working to organize, were one of the main targets of AB 5, along with independent truckers. “It is no secret that AB 5 was aimed at ride share and food delivery companies, and it could end up being the case that most companies doing business in California must comply with the controversial statute except for the very companies at which it was aimed,” says Michael S. Kun, an attorney with the law firm of Epstein Becker Green.

Related reading:

Wage and Hour Defense Blog, “California Voters Pass Proposition 22, Allowing App-Based Ride Share and Food Delivery Companies to Treat Drivers as Independent Contractors,” by Michael S. Kun.


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