What is Prop 22? How California voters will decide Uber, Lyft’s future

  • Proposition 22 is a November ballot measure that aims to exempt ride-sharing and food-delivery firms from AB5, a California gig worker law that forces Uber and Lyft to classify their drivers as employees.
  • Prop 22 was created and funded by Uber, Lyft, Doordash, Postmates, and Instacart as a way to skirt AB5. Uber, Lyft, and DoorDash have given $30 million to support the measure.
  • If Californians vote the measure into effect in November, Uber and Lyft will get exactly what they want and will be able to continue saving costs by paying drivers as independent contractors.
  • Visit Business Insider’s homepage for more stories.

A California court on Thursday granted Uber and Lyft a stay in their appeal of a court ruling that said drivers must be classified as employees, not contractors.

If they weren’t given the extra time, the companies were threatening to shut down their business throughout California. And if the companies had shut down, riders would have been cut off from the convenience of booking rides on the apps — which likely would have incentivized Californians to back Proposition 22, a measure that will appear on the ballot in the November election.

Prop 22 strives to exempt ride-sharing and food-delivery companies from the Assembly Bill 5 gig worker law that was passed in September 2019, meaning Uber and Lyft could continue classifying — and paying — drivers as contractors, not employees. Uber and Lyft have built their business models around doing so, reserving full-time employee status for corporate roles to keep costs low. Uber, Lyft, Doordash, Postmates, and Instacart have poured a total of $110 million into support for the measure, according to the San Francisco Chronicle.

Why some either support or oppose Prop 22

Uber and Lyft say the measure would allow drivers to keep working whenever they want to, which is why some drivers also reportedly support Prop 22. Uber and others would also be required to pay drivers 130% of the minimum wage per each hour of driving time, and kick in small amounts towards drivers’ health, occupational, and liability insurance. Still, upgrading drivers to employee status could add up to 30% in labor costs for them, according to the San Francisco Chronicle. 

Uber CEO Dara Khosrowshahi has said the company and other gig-based firms should form a so-called “benefits fund” to cover expenses, like healthcare fees, and to maintain work flexibility for drivers.

“Our current employment system is outdated and unfair,” Khosrowshahi wrote in a recent New York Times op-ed. “It forces every worker to choose between being an employee with more benefits but less flexibility, or an independent contractor with more flexibility but almost no safety net.”

President Trump’s campaign has expressed support for the companies and for Prop 22, calling AB5 out as an “all-out assault on workers” that could lead to job losses, according to the Washington Post.

However, drivers would still technically not be considered full- or part-time employees, with the attendant rights and benefits, under state law with Prop 22, which is one of the factors driving critics to oppose the measure.

Prop 22 won’t be voted on until November, but the stay issued Thursday will last until the outcome of the appeal has been decided — which may or may not happen before voters head to the polls. That leaves the question of what the companies will do in the time after the stay runs out, but before they get an answer on Prop 22. 

Drivers and labor advocates have long argued that Uber and Lyft’s businesses are harmful to workers because they pay them lower wages and provide fewer benefits, like unemployment and health insurance.

“Our state and workers shouldn’t have to foot the bill when big businesses try to skip out on their responsibilities,” Xavier Becerra, the attorney general behind a May lawsuit against the firms, said according to Cal Matters. “We’re going to keep working to make sure Uber and Lyft play by the rules.”

Axel Springer, Insider Inc.’s parent company, is an investor in Uber.

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