While the COVID-19
pandemic sweeps across this nation, employers are taking advantage of the
pandemic-induced recession to, once again, eliminate jobs and transition
workers into the gig-economy. A recent
New York Times article highlights the
uncertainty facing today's workers. The labor market has only recovered 12
million of the 22 million jobs lost this past spring, leaving 10 million
formerly employed workers, often in the service-industry, reeling. Many of
these jobs may not return once the pandemic is over and the economy improves,
as happened after the Great Recession of 2008. While the New York Times notes
that these workers often need retraining or additional education to compete for
jobs, gig-economy companies continue to hire these vulnerable workers without
the employment protections to which workers are – or should be - entitled. In
California, the gig-economy companies pulled off a sleight of hand, through the
most disproportionately-funded ballot measure in the state’s history,
Proposition 22 ("Prop. 22"), for the purpose of potentially continuing to exempt
their workers from some of the robust employee protections that California’s
legislature, Governor, Supreme Court and lower courts had previously ensured.
While the ballot measure succeeded, gig-economy workers should still have
claims under the law.
The roots of today's gig-economy employment
crisis began in 2008. At that time, 9
million workers lost their jobs. In its
aftermath, workers often found less secure employment and/or relied on
alternative work like being an independent contractor in the gig economy. Unsurprisingly,
a plethora of gig-economy companies, like DoorDash, Uber, Lyft, Instacart, and
Postmates, have risen to be market leaders on the backs of these marginalized
workers that they have treated as independent contractors exempt from legal protections.
In response to the rise of the gig economy and the precarious position of
gig-economy workers, all three branches of California government - the courts,
legislature, and executive branch - re-affirmed that many gig-economy workers
are employees entitled to the legal protections of the California Labor Code.
Such protections include minimum wage (Cal. Lab. Code § 1194, among others),
overtime (Cal. Lab. Code § 510), reimbursement for business expenses (Cal. Lab.
Code § 2802), and paid sick leave (Cal. Lab. Code §246). Here at Bryan Schwartz
Law, we have written extensively about California's efforts to protect gig-economy
workers here,
here,
here,
here,
and here.
In short, the California Supreme Court in Dynamex
Operations West, Inc. v. Superior Court held that workers are presumptively
employees subject to the straightforward ABC test, which considers (among other
things) whether the workers are providing the core services of the business
(like those who drive for Uber and Lyft). The California legislature agreed
with the Court and codified the ABC test outlined in Dynamex with A.B. 5, which the Governor signed, and went into
effect on January 1, 2020. The Attorney General of California has sued Uber and
Lyft (People v. Uber and Lyft (Sup.
Ct. San Francisco), Case No. CGC-20-584402) to require them to stop
misclassifying their workers under A.B. 5, and won a
preliminary injunction on August 10, 2020 requiring Defendants
to reclassify their drivers as employees during the pendency of the lawsuit.
In
response, several gig-economy companies worked to place Prop. 22 on the ballot.
Prop. 22 exempts from A.B. 5 any app-based
drivers that (a) provide delivery services on-demand through an online
application or platform or (b) use a personal vehicle to provide prearranged
transportation services for compensation through an online application or
platform. In other words, your ride-share drivers and food delivery persons are exempted from A.B. 5's codification of the ABC test. In order to sell Prop. 22
to voters through its advertising blitz, these gig-economy companies promised at
least 120% of the minimum wage (which has been estimated to work out to $5.64
per hour after deducting for wear-and-tear) and 30 cents per mile when engaged
- not waiting for a fare or order. While Prop. 22's passage is a setback for
workers' rights, all may not be lost. Prop 22. may not be retroactive. Prop. 22
appears to be forward-looking and silent as to any worker misclassification
claims that arose prior to Prop. 22's passage. When the Court issued its August
10th preliminary injunction, Judge Schulman appeared to suggest that "it
would not moot out . . . past violations." (Order for Preliminary
Injunction, People v. Uber and Lyft (Aug.
10, 2020), p.8). Furthermore, Prop. 22's provisions regarding healthcare
subsidies and mileage reimbursement focus on future dates for payment or
calculation. The remaining provisions do not explicitly discuss retroactive
application except for Article 9. Article 9 provides that the Legislature may
only amend Prop. 22 by a super-super majority - 7/8ths of the Legislature -
including any amendments passed since October 29, 2019 (the date the ballot was
filed). While it appears amending Prop. 22 will be challenging, this suggests
that workers may continue to pursue claims for minimum wage, overtime, and
reimbursement for business expenses that accrued prior to Prop. 22's passage.
Furthermore, the 9th Circuit in Vazquez
v. Jan-Pro Franchising International, Inc. made clear that Dynamex and the ABC test apply
retroactively. Thus, workers may have significant misclassification claims that
have accrued prior Prop. 22's passage.
Moreover,
while Prop. 22 may have exempted gig-economy workers from the protections
conferred upon them by A.B. 5 and the ABC test, gig-economy workers may be
employees under other relevant tests. The Dynamex
court extensively discussed 3 alternative tests (from Martinez v. Combs)
for employment under California’s Wage Orders: 1) to exercise control over
wages, hours, or working conditions; 2) to suffer or permit to work; and 3) to
engage, thereby creating a common law employment relationship. You can learn
more about these 3 alternative tests here
and the Borello test for common law
employment relationships here.
The Dynamex court only applied the
ABC Test with respect to the second alterative test: to suffer or permit to
work. Dynamex (2018) 4 Cal.5th 903,
965. In enacting A.B. 5, the Legislature declared its intent to codify the Dynamex decision that "interpreted
one of the three alternative definitions of 'employ,' the 'suffer or permit'
definition . . . [and that] [n]othing in this act . . . affect[s] the
application of alternative definitions . . . not addressed by the holding of Dynamex. Assembly Bill 5, Section 1(d)
and (f), 2019-2020, Reg. Sess. The statute itself takes a more precise
alternative in requiring that if a court rules the ABC test does not apply to a
particular context, then the common law relationship test from Borello should be used. Labor Code § 2750(a)(3). Thus, A.B. 5's
codification of Dynamex and the ABC test
does not apply to the first and third alternative tests. Therefore, Prop. 22's
exemption from A.B. 5 is limited to the second alternative test. With Prop.
22's passage and A.B. 5's statement that the Borello common law relationship test applies in the event a court
exempts a particular situation from the ABC test, it is unclear which test
shall be used to demonstrate that gig-economy workers are employees because
Prop. 22, not a court, preempted A.B. 5. Workers may be employees under the
first and/or third (Borello) tests
and therefore entitled to the full protection of the California Labor Code.
Despite
Prop. 22's passage, the fight for workers' rights continues. Gig-economy workers
may still have misclassification claims moving forward. Workers and their
advocates must recognize that while the fight may become more difficult after
the misguided passage of Prop. 22, there are still avenues for pursuing these
claims.
