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How your rights as an app-based employer may soon change

| Oct 28, 2020 | Employer Defense

As an app-based employer in California, it’s probably no surprise that state laws impact the way your company classifies independent contractors and employees. But you might not know what will happen after this year’s election.

Last year’s passage of Assembly Bill 5 (A.B.5) made way for many app-based workers to get employee rights, like workers’ compensation benefits, guaranteed minimum wage, unemployment insurance and overtime pay. But not all companies complied.

Neither Uber nor Lyft satisfies the three-factor test that identifies workers as independent contractors only if the worker:

  1. Doesn’t need to follow the hiring company’s instruction when performing day to day work;
  2. Does work that deviates from the company’s regular operations;
  3. Is involved in another job or works with another company to complete similar work.

According to The New Yorker, a lawsuit against Uber and Lyft began earlier this year to push both companies to reclassify eligible contractors as employees per A.B.5. In response, the two leading rideshare companies said they’d stop serving the state of California and Proposition 22 was born.

Prop. 22 is also known as App-Based Drivers as Contractors and Labor Policies Initiative. At its core, Prop. 22 is a way for app-based companies to opt out of classifying drivers or couriers as employees.

During the upcoming election, voters across the state will decide if Prop. 22 will pass. If it does pass, rideshare employers may have to give drivers who work more than 15 hours a week pay that’s higher than minimum wage, a health care stipend and occupational accident insurance. And if it doesn’t pass, the app-based companies must follow A.B.5 and begin reclassifying contractors who meet employee status.

Whether or not your company has yet to follow A.B.5, you might have to make changes in November. Given the uncertainty over the classification of workers as independent contractors v. employees created by existing law, A.B.5 and Prop 22, as well as the penalties employers currently face for misclassification of employees as independent contractors, you may wish to re-evaluate your business practices in this area.

An experienced employer defense attorney can guide you through any uncertainty your company is facing.

Note: California voters supported this ballot initiative to define app-based transportation (rideshare) and delivery drivers as independent contractors and adopt labor and wage policies specific to app-based drivers and companies.