The never-ending fight to protect self-employment, freelancing, and gig work in California continues. Last week, gig workers received good news.
The California Supreme Court upheld Proposition 22, a ballot measure passed in 2020 that allowed ride-sharing drivers to remain classified as independent contractors rather than be reclassified as employees of gig companies.
Reclassification is costly for businesses. To absorb new labor costs, they would cut jobs or alter operations in ways that leave gig workers worse off. Yet, unions and pro-union policymakers are forcing freelancers, self-employed people, and gig workers (such as rideshare drivers and app-based delivery drivers) to be classified as employees of gig economy companies to which they contract their services.
As we know, independent contracting provides flexibility and freedom that traditional employment doesn’t provide. This legal decision protects gig workers and allows them to continue to work for themselves on their own schedules.
In a statement, Uber celebrated this development:
Whether drivers or couriers choose to earn just a few hours a week or more, their freedom to work when and how they want is now firmly etched into California law, putting an end to misguided attempts to force them into an employment model that they overwhelmingly do not want.
Background
The California Supreme Court decision is another twist in the battle to protect worker freedom. Trouble began when California’s Assembly Bill 5 (AB5) law was enacted in 2020. That law reclassified millions of workers from independent contractors to employees.
As we’ve written, this led to self-employed professionals, freelancers, and gig workers losing opportunities, income, and opportunities. Self-employment dropped by 10.5%, and overall employment fell by 4.4% in affected industries, according to the Mercatus Center.
The business models for gig economy companies, such as Uber and Postmates, would have been upended by AB5, as they would have been forced to hire the drivers who use their apps. To stay in business, gig companies brought the issue directly to the people of California through the Prop 22 ballot initiative. Californians sided with the rideshare companies. Nearly 60% of voters affirmed that gig economy workers should not be classified.
As the Chamber of Commerce explained in an amicus brief:
Proposition 22 reflects the overwhelmingly popular and sensible policy judgment of the people of California that app-based drivers should not be treated as employees. Wage-and-hour laws were not designed for network companies that simply match drivers with passengers. Such platforms exercise virtually no control over drivers’ activities. Instead, drivers typically have the unrestricted right to use multiple apps simultaneously and to use those platforms to control their own work. Classifying app-based drivers as employees would cause economic harm and would frustrate the will of California voters.
The Chamber went on to add that ”overturning Proposition 22 could result in reclassification of nearly two million workers—10% of California’s workforce.”
Yet, labor unions, the drivers of AB5 and mass classification efforts, sought to overturn Prop 22 through the courts. The Teamsters blasted the decision:
By allowing these greedy Big Tech companies to misclassify their workers as independent contractors, the Court gives them the go ahead to undermine U.S. labor law and neglect their responsibilities to their workers.
Whether you work for Uber, Lyft, or Amazon, you deserve overtime pay, paid sick leave, unemployment insurance, and other basic worker protections that come with employment. It is dishonest and disrespectful that these multibillion-dollar corporations are denying workers much-needed benefits so they can skip out on taxes and make workers and taxpayers foot their bill.
Independent contractors do not receive the same benefits as employees, but that is a tradeoff they are willing to make for the benefits of flexibility and working for themselves.
Notably, not all gig workers and freelancers are full-time. Many rideshare drivers are employed with benefits elsewhere but earn extra income working through these apps. Others may have gained benefits from their spouses or family members; they are not motivated by workplace benefits but control over their schedule or higher pay.
For the independent contractors who do not have access to benefits, policymakers have an opportunity to extend access to portable benefits, a relatively new idea worth exploring.
In the meantime, thanks to this court decision gig workers in California can continue to work independently in peace.