Decisive Vote on California’s Proposition 22

Companies like Uber, Lyft, and Grubhub, as well as many other gig-based employers are celebrating a decisive victory in California, after voters said yes to a ballot measure that exempts them from a law that could have directly challenged their business models.

California’s Proposition 22 was approved, which exempts companies from having to classify app-based transportation drivers as employees; instead these drivers will be considered contractors, and while they will be given pay guarantees and some health benefits, the cost to the business models of these companies is much lower than the alternative.This measure contrasts directly with a recent California law (Assembly Bill 5) that was slated to reclassify all gig-working contractors as employees, which would ensure benefits such as overtime pay or sick leave.

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Major contracting brands are seen as the winners in this statewide referendum.

Nearly 60% of Californians Side with Uber and Lyft

Proposition 22 is seen as a major win for the likes of Uber, Lyft, Instacart, and DoorDash, all of which formed their businesses around gig workers ferrying riders and goods as independent contractors. If Proposition 22 did not pass with voter’s approval, Assembly Bill 5 could have been the end for the way businesses like these worked in California.

Many companies would have been forced to classify their workers as employees and provide them with the same benefits afforded to regular members of California’s workforce. However, between industry leaders, a coordinated $200 million public outreach campaign may have helped push Californians in their favor.

Contractors and Employers will be Impacted Directly

California is the fifth largest economy in the world, and there have been doubts about whether either firm would have pulled service out of the state; however, such a move wouldn’t have been without precedent.

Uber and Lyft both ditched Austin, Texas, after the city voted to require stricter background checks and fingerprints for drivers. The companies remained out of the city for a year until a campaign by the ride-hailing giants pushed the Texas State Legislature to overrule the city’s requirements.

The Proposition 22 vote is largely expected to be viewed as a bellwether for other states that were mulling increasing protections for gig workers. The move should give confidence to investors who feared that if Proposition 22 became law, states across the country would have moved to introduce legislation similar to Assembly Bill 5.