This week, California residents voted to pass Proposition 22, overriding Assembly Bill 5 (AB5) on the question of whether app-based drivers are employees or independent contractors. Although the ballot measure was specific to app-based drivers, we believe it will impact how AB5 is applied to other types of workers. Here’s what you need to know:
What is Proposition 22?
Proposition 22 is a ballot measure introduced by Uber, Lyft, and DoorDash that overrides AB5 on the question of whether or not app-based drivers are considered employees or independent contractors. Companies are able to grant independent contractor status for app-based drivers if they meet certain requirements including letting drivers choose when and where they work, rejecting assignments, driving for competitors, or performing any other types of work. In return, the new law offers several benefits to drivers including a minimum earning guarantee of at least 120 percent of the minimum wage, health care subsidies, and expense reimbursements. Companies will also be required to create policies that offer protection against wrongful termination, discrimination, and harassment and provide safety training.
What is Assembly Bill 5 (AB5)?
AB5 is a California law passed in 2019 that restricts the classification of an independent contractor to those individuals able to meet all three requirements of the following “ABC” test:
A. Being free from the control of the company they are working for.
B. Performing work that’s outside the course of the company’s usual business.
C. Having their own independently established trade, occupation, or business.
The legislation addressed concerns related to the lack of worker protections for independent contractors including minimum wage, meal and rest breaks, injury insurance, and eligibility for paid leave and disability benefits.
How does AB5 impact me?
Companies using Field Nation to complete work in California are working with independent contractors and are expected to meet the parameters of the “ABC” test. If the type of work you are conducting in California does not meet these requirements, you can use one of our Registered Service Companies. These organizations have registered that the technician completing your work is an employee of their company.
New regulations introduce changes that need to be assessed and minimized. If you are unsure of whether the work you are asking to be performed or the applicable worker classification violates AB5, we recommend consulting with legal representation to determine the best path forward for your business.
Does Proposition 22 impact companies using Field Nation’s platform?
No. Prop 22 applied to companies using app-based drivers only. However, we do believe that its passing signals that California voters believe there is value in the independent contractor worker model and that the stringent and vague requirements of AB5 need to be revisited.
We are committed to keeping you up to date on the changing regulatory environment and will continue to share updates as we learn more.