The dust is beginning to settle after California voters overwhelmingly approved a new test for determining whether app-based rideshare and delivery drivers are considered employees or independent contractors, essentially overturning the ABC Test as it applies to a wide swath of the gig economy. But now that Proposition 22 proved to be wildly successful, what’s next? Here are the five biggest questions – and some answers – that remain in light of this groundbreaking development.
Now that all major media outlets have projected Joe Biden to be our next president, it is natural to begin to wonder what the next four years might look like for the gig economy. Our firm published a detailed assessment about what employers can expect in 11 key areas of workplace law that you can find here. I’d encourage you to give it a look; it covers some fascinating territory.
In one of the most closely watched (and most expensive) fronts in the ongoing battle over employment classification of gig workers, California voters appear to have approved Proposition 22, a ballot measure that confirms the independent contractor status of certain rideshare and delivery drivers. While likely not the end of the debate, the passage of Proposition 22 is a big win for the gig economy as it may have ripple effects across the industry.
Rideshare companies in California have now been ordered by an appeals court to reclassify their drivers as employees, threatening to upend the very foundation of the gig economy business model that offers flexibility and freedom to workers and businesses alike. Yesterday’s ruling by the California Court of Appeal upholds the injunction granted several months ago by a state court judge in San Francisco against the two biggest ridesharing companies in the country. But once again there is a silver lining to yesterday’s developments that provides a glimpse of hope for these businesses and gig economy companies in general – the order will not go into effect immediately, meaning that a ballot measure that will be decided on Election Day could permit their business models to survive despite the judicial setback.
The Department of Labor has turned down Congressional calls to extend the time period to receive public comments about the proposed independent contractor rule that would make it easier for gig economy businesses and other hiring entities to avoid federal misclassification claims. Yesterday’s announcement means that the agency remains on track to close the comment period on October 26, with a final rule to be released soon thereafter.
Gig economy companies across the country had a whirlwind September, as legal developments impacting their business models continued to unfold. Here are the five most significant workplace law developments in the gig economy world from the past month.
Just a few hours before they were subject to a court order forcing them to transform all of their drivers from independent contractors to employees, a California appeals court spared the nation’s two largest rideshare companies from having to immediately overhaul their fundamental business models. The court blocked a San Francisco judge’s order from taking effect while it heard the companies’ appeal, handing the gig economy giants a much-needed reprieve. But it comes at a cost – the appeal was fast-tracked and will be played out at groundbreaking speed, meaning that we will be closer to a final answer to this momentous question sooner rather than later.
Gig economy companies received bad news yesterday when yet another federal appeals court ruled that delivery drivers – even independent contractors – can escape otherwise valid arbitration agreements. This is now the third federal appeals court to conclude that the “transportation worker” exemption in the Federal Arbitration Act should be read broadly enough to exempt typical gig economy workers, setting up a split in the circuits that has businesses operating across the country scratching their heads on how to proceed. What do gig economy companies need to know about the 9th Circuit’s ruling against Amazon.com?
Last week’s successful effort by California’s Attorney General to obtain an injunction forcing two ride-sharing giants to reclassify their drivers as employees may be the beginning of a trend that threatens to create a new normal for gig economy companies. Days later, the local district attorney in San Francisco filed a similar request in court seeking to force DoorDash’s independent contractors to be classified as employees. What does this August 12 move signal? Essentially, if you operate in a jurisdiction like California that has adopted the ABC test for determining worker status, you could be the next target of a government-initiated lawsuit that would aim to upend the very business model you have created.
A report by Ben Penn in Thursday’s Bloomberg Law casts serious doubt about whether the Department of Labor will proceed with a misclassification rule before the end of this presidential term. We reported last month that the July 1 regulatory notice issued by the DOL announcing an impending regulation for determining independent contractor status under federal wage and hour law was good news for gig economy companies. Such a rule would almost certainly provide a flexible standard permitting typical gig economy businesses to classify their workers as contractors under federal law. And the cherry on top was the news (also broken by Ben Penn at Bloomberg) that the agency was aiming to fast-track the rule to be completed by year’s end, insulating it from the possibility that a new administration voted into the White House this Election Day could quickly reverse course. But yesterday’s news casts a pall over this hopefulness and brings gig economy companies back to earth with the realization that we may not see such a proposed rule anytime soon.