How Prop 22 would limit flexibility for independent contractors

The debate about Prop. 22, the California ballot initiative sponsored by Instacart, DoorDash, Postmates, Uber, and other gig economy companies, has largely been focused on workers’ classification status, with the No on Prop. 22 campaign arguing for employment status for gig workers, and gig companies arguing that passing Prop. 22 would protect independent contractor status.

But the reality is that Prop. 22 does not simply maintain independent contractor status for gig workers — nor would the failure of Prop. 22 simply “reclassify” workers as employees.

Many gig workers value being independent contractors — but the status only provides freedom to the extent it’s defined in law. Prop. 22 would change classification laws for app-based workers so dramatically that the freedom associated with independent contractor status today would be lost, and it would lock in this new definition almost permanently. Voting No on Prop. 22 is essential to ensuring workers can drive policies to truly protect their independence and pay.

- Rachel Lauter, J.D., Executive Director of Fair Work Center / Working WA

The real core of the debate is the concept of flexibility, which most gig workers see as the primary value of app-based work. Companies sponsoring the ballot initiative argue that Prop. 22 allows workers to maintain flexibility by classifying them as independent contractors.

So far, little outside analysis has been conducted to investigate this claim. In this analysis, conducted by the Pay Up campaign in collaboration with legal experts, we examine the ways that the passage of Prop. 22 would impact flexibility for independent contractors.

Platform technology allows many drivers the flexibility of deciding when and where they work — flexibility that may not exist in other jobs — but these companies profit by using that same technology to leverage the threat of de-platforming their workers, to surveil their workers, and to restrict their workers' ability to set their own prices. These companies are now spending hundreds of millions of dollars to create legal rules like Proposition 22 that would allow them to exert even more power over their workers while immunizing themselves from requirements to provide basic protections to the workers whose labor drives their profits. 

— David Seligman, Esq., Director of Towards Justice

Prop. 22 does not “maintain” independent contractor status for workers — it redefines independent contractor status

A crucial article in the ballot initiative has been largely ignored by both sides of the debate about Prop. 22. Under Article 2, Prop. 22 would indeed exempt workers from California’s “ABC test,” which currently regulates whether workers are employees or independent contractors — but it would also replace the ABC test with a new classification test written into the ballot initiative.

If passed, the law would not simply maintain independent contractor status for gig workers — it would redefine independent contractor status altogether.

This new test in Prop. 22, which applies only to app-based ridehail and delivery workers, actually allows companies to exercise significantly more control over workers, while still classifying them as independent contractors. In essence, it creates a subgroup of independent contractors who can legally be treated less like other contractors, and more like employees, minus the benefits — offering workers the worst of both worlds.

How does the new classification test in Prop. 22 define independent contractors?

Under the new test in Article 2 of Prop. 22, app companies can classify their ridehail and delivery workers as independent contractors as long as they meet these four standards:

• Do not “unilaterally” schedule workers for shifts on specific days / times, or require a minimum number of hours.

• Do not remove workers’ access to the platform for refusing any specific offer.

• Do not restrict workers from working on other apps — except during deliveries.

• Do not restrict workers from working other jobs.

As long as companies abide by these minimal rules they have designed for themselves, they will be free to exercise virtually any other form of control over their independent contractors.

This new classification test would supersede all existing definitions of “independent contractor” status in California — meaning that if Prop. 22 passes, the above requirements are the only freedoms companies would have to offer workers in order to classify them as independent contractors.

Under Prop. 22, gig companies could dramatically restrict independent contractors’ freedom

While the above list may look appealing at first glance, several technicalities and omissions will allow companies to significantly increase their control of independent contractors. In this section, we will take a closer look at the kinds of control companies will be able to exercise over workers if Prop. 22 passes.

Section (a) of Article 2 does not require that companies allow workers to work “whenever they want,” as companies have claimed; it only requires that companies do not “unilaterally” prescribe shifts for drivers or set a minimum number of hours.

Companies could still exercise control over scheduling by:

• Requiring workers to work on shifts rather than on demand — and penalizing or deactivating workers if they are unable to work their assigned shifts.

• Putting a cap on the maximum number of hours worked per week. (Note: companies may be inclined to limit hours, because Prop. 22 also creates a partial healthcare subsidy for workers who work 15 hours a week or more.) 

• Preventing workers from taking time off by discontinuing offers to workers who do not consistently log in for work.

Under section (b) of Article 2, companies cannot remove workers’ access to the app for rejecting “any specific offer.”

But companies could still limit workers’ control over the jobs they do by:

• Requiring workers to accept a specific percentage of jobs in order to continue working, potentially forcing them to accept low-pay or long-distance jobs.

• Sending workers offers without transparency about what the job entails, forcing workers to decide whether to accept without knowing, for example, where they would have to drive or how much they would get paid.

• Penalizing or deactivating workers for cancelling jobs, even if they weren’t at fault for the cancellation (for example, when delays at a restaurant or inventory at a store make the job difficult to complete on time).

And the new classification test in Prop. 22 does not address the level of control companies can exercise over workers more broadly.

Under Prop. 22, companies could reduce independent contractors’ freedom by:

• Assigning direct managers to monitor and discipline workers.

• Implementing hiring practices like applications and interview processes to exercise additional discretion over who can access app-based work.

• Requiring mandatory company trainings, which can be entirely uncompensated.

• Requiring workers to wear uniforms.

• Limiting the geographic areas where workers are allowed to work.

• Requiring workers to finish deliveries within a specified amount of time, and penalizing or deactivating them if they take longer.

• Setting contract terms that allow them to deactivate workers for almost any reason, like a single bad review from a customer, a false accusation of misconduct, or a traffic or parking violation.

• Putting in place any other restrictions they’d like that are not specifically outlined in the text of the initiative.

Companies claim that workers can maintain independence by voting in favor of Prop. 22 and avoiding employee classification — yet many of the restrictions outlined above, which would be legal under Prop. 22, are precisely the kinds of control workers hope to avoid by being independent contractors.

Gig companies already limit workers’ independence more than typical independent contractors in other fields — for example, gig workers do not dictate their own pay rates as most freelancers do. And some gig companies already cross the line of what’s acceptable by exercising even more control over independent contractors. Many of the above restrictions are already formal or de facto policies on apps, like unfair deactivations, penalties for cancelling orders, and requirements to maintain a specific acceptance rate.

But under California’s current laws, the threat of being sued for misclassification incentivizes companies to limit the level of control they exert over workers. Contrastingly, if Prop. 22 passes, these practices will be legally allowed by California law, and companies will be free to exercise even more control. As a result, workers may end up being independent contractors in name only: formally classified as contractors, but treated by gig companies like employees.

It’s not only possible, but likely, that companies will choose to ramp up their level of control over workers if Prop. 22 passes. The restrictions companies currently place on workers are largely designed to maximize profits by minimizing pay per delivery. The new definition of independent contractor in Prop. 22, drafted by gig companies themselves, reflects the level of control companies seek to exert over workers in order to further maximize profits. As a result, workers who vote for Prop. 22 in hopes of avoiding employment classification may find themselves treated more like employees if it passes — and less able to rely on gig work as a flexible source of income.

Labels like "employee" or "independent contractor" are meaningless when it comes to Prop. 22.  If passed, the law gives the companies near-complete power over working conditions — including the degree of flexibility they decide to give workers. And Prop. 22 cannot be amended without near-unanimous approval of the California legislature: it permanently takes away workers' power to pass laws to build higher labor standards. It permanently eliminates any possibility of state-created collective bargaining for workers. And though workers have won big victories against the companies in many cities, Prop. 22 permanently takes local control off the table.

— Rebecca Smith, Director of Work Structures, National Employment Law Project

Prop. 22 offers minimal protections for gig workers

Seemingly in exchange for the new restrictions it places on gig workers’ freedom, Prop. 22 also lays out some basic protections for gig workers. However, the protections provided are relatively minimal.

Prop. 22 would set a “pay floor” that may allow companies to drive pay down.

➡️ Prop. 22’s requirement for companies to pay 120% of minimum wage for “engaged time” would only account for the time spent from acceptance of an offer to dropoff. “Engaged time” wouldn’t include the time spent waiting or driving back from dropoffs. It wouldn’t even include time spent on jobs that have to be “abandoned,” regardless of whether the worker is at fault.

➡️ Additionally, language in Prop. 22 would allow companies to exclude any time they deem “reasonably necessary to remedy or prevent fraudulent” use of the app. In other words, gig companies would be allowed to not pay for all the time workers spend on a given job if it doesn’t match the company’s estimate of how long the job should take.

➡️ Furthermore, apps would be allowed to calculate pay by averaging earnings over a two-week period, rather than on a per-job basis. Individual jobs could still fall below this “pay floor.” Using average earnings to calculate pay incentivizes apps to tune their algorithms to send higher-paying jobs to those who are earning less, and lower-paying jobs to those who are earning more. Many workers depend on “surges,” bonuses, or “cherry-picking” to maximize their earnings; under Prop. 22, it’s likely these workers would see their overall pay decrease. This would effectively make the earnings standard a “pay ceiling” as well as a pay floor.

Prop. 22 offers a mileage reimbursement that falls far below actual worker expenses.

➡️ Prop. 22 does set a mileage reimbursement as part of its pay floor. However, the rate offered is only 30 cents per mile — just over half of the official IRS reimbursement rate.

➡️ Companies would also pay only for “engaged miles,” leaving workers to cover the cost of mileage driving back from dropoff locations or driving to “hotspots.”

Prop. 22’s discrimination protections won’t address the primary forms of discrimination faced by workers.

➡️ Prop. 22 contains an “anti-discrimination” policy that makes it illegal for companies to discriminate based on race, gender, and other protected classes. However, these protections would only prevent gig companies from deactivating or refusing to hire workers based on their identity. It would do nothing to address the most common form of discrimination that workers of color, immigrants, women, and others face in app-based work: discrimination by customers and businesses.

Prop. 22 would require companies to provide healthcare subsidies for some workers, but companies could limit who is eligible.

➡️ The initiative would require companies to pay a subsidy for some workers who are enrolled in a qualifying healthcare plan. However, partial subsidies would only kick in when workers’ average “engaged time” on a given app over the course of a quarter comes to 15 hours per week, and maximum subsidies would only kick in after 25 hours. Companies could limit the offers sent to gig workers to prevent them from reaching these thresholds.

Prop. 22 would require companies to offer accident insurance, but may force workers to pay for it out of pocket.

➡️ While Prop. 22 mandates that both occupational accident insurance and accidental death insurance be provided to workers, the language in the ballot initiative simply says companies must “carry, provide, or otherwise make available” these insurance policies. In other words, companies could meet the requirement laid out in Prop. 22 by simply giving workers the option of paying for insurance out of pocket.

In exchange for these minimal benefits, Prop. 22 asks workers to hand over the freedom they value as independent contractors.

Adding up these loopholes paints a picture of the future of the gig economy if Prop. 22 passes: a model in which companies can treat workers more like employees, but offer substantially weaker benefits and protections.

Why gig workers need freedom & flexibility — and who would be harmed if Prop. 22 passes

The majority of gig workers name flexibility as the #1 value gig work provides. Whether they rely on gig work as their primary source of income or use it to supplement underpaid low-wage work, this flexibility is crucial for tens of thousands of workers who have been failed by conventional employment models. Single parents need extremely flexible schedules to take care of their children. Workers with chronic illnesses need unpredictable, extended breaks from work. Workers with unstable housing who frequently relocate need a job that they can carry with them.

And the relatively low-barrier nature of gig work makes it available to many workers who face discrimination in conventional employment: people of color, immigrants, LGBTQ workers, Deaf workers and other workers with disabilities, and seniors.

Already, gig companies’ restrictions on flexibility have harmed the marginalized communities apps depend on to do their business. For example, some apps require shift scheduling, making it difficult for workers with unpredictable health conditions or family obligations to work when they’re able to. Many apps make it difficult for workers to reject low-paying or long-distance orders by requiring high job acceptance rates, or by “stacking” additional offers onto those they have accepted. And almost all of the apps drive pay down by flooding the market with as many workers as they can recruit, resulting in workers spending more and more time logged onto the app, waiting for offers and not receiving pay.

If Prop. 22 passes, companies will be allowed under California state law to exercise additional control over independent contractors. Some workers who need an alternative to conventional employment may lose their access to gig work entirely. Others who continue working on apps stand to lose much of the flexibility they have come to depend on, however limited it may be. By redefining independent contractor status for gig workers, Prop. 22 would create a subgroup of pseudo-contractors composed primarily of people of color, immigrants, and other marginalized workers, whose ability to earn income will be limited by restrictive app policies. The result is a deepening of the economic inequities already perpetuated by the gig economy.

What can gig workers expect next if Prop. 22 passes?

Under Prop. 22, workers may see apps begin to introduce more restrictions on their scheduling and freedom, either by formal policy or by algorithmic practice, and many may see overall pay decrease to the level of the “pay floor” outlined in the initiative. The future of the gig economy if Prop. 22 passes may offer workers the worst of both worlds: less control over when, where, and how they work, and minimal benefits that may drive their pay down further.

Furthermore, Article 9 of Prop. 22 would essentially lock these policies in place permanently in California. The ballot initiative requires a 7/8ths supermajority in the California Legislature to amend. This means new state laws that would impact gig workers’ pay, benefits, protections, freedoms, and rights, including laws allowing workers to organize and negotiate with companies, would need to get support from 7/8ths of state legislators, rather than a simple majority. This is a nearly impossible barrier to overcome, and it means that gig workers who want more freedom or better protections will have almost no path to advocating for legislative changes to provide them.

And under Article 9, even an amendment that meets this unusually high threshold would have to be “consistent with, and further the purpose of,” Prop. 22.

Prop. 22 specifically prevents any amendment that would change the new classification test that companies to exert more control over workers. This means that the California Legislature would be unable to pass any new laws requiring gig companies to give independent contractors more freedom.

Prop. 22 would also prevent cities from passing any local regulations about the gig economy. Workers would be unable to advocate for new city-level ordinances to address any issues related to pay, tips, scheduling, leave, benefits, licensing, or protections from unfair deactivations.

If Prop. 22 passes, it will prevent workers from organizing for future laws, and undo legal protections workers have fought for during the COVID crisis, like the right to access paid sick days and unemployment benefits.

Prop. 22 does not address how the minimal rights for workers it outlines would be enforced, and it does nothing to address forced arbitration clauses which are common in gig workers’ contracts, preventing them from suing companies — so even if gig companies violate the rules they have outlined for themselves in Prop. 22, workers’ ability to address the violations will be limited.

What can gig workers expect next if Prop. 22 fails?

If Prop. 22 fails, California state law regarding independent contractor status remains as it is for now, and companies are legally prevented from controlling independent contractors’ work. In the immediate term, gig workers would remain as they are: classified by the companies as independent contractors, with relative but not total flexibility. However, there is a path for workers to improve working conditions — either by working to enforce existing laws that would provide workers protections like the minimum wage, or by working to advocate for new laws defining independent contractor status and the protections it should entail.

While the passage of Prop. 22 would mean its policies are “locked in,” the failure of Prop. 22 would mean negotiations could continue — and workers could have a real seat at the table. Whether they want to be employees or independent contractors, workers could fight for new laws they design themselves, rather than laws designed by corporations or lobbyists.

Many workers who value independent contractor status fear that if Prop. 22 fails, they will lose their flexibility because they will be reclassified as employees. This fear is reasonable, given that companies advocating for Prop. 22 have implied it’s the only way to prevent rigid employment classification. However, it’s clear that gig companies see independent contractors as vital to their business model. They have poured millions of dollars into defending themselves against misclassification claims to prevent reclassifying workers as employees, and are unlikely to do so unless they have no other choice. If Prop. 22 fails, companies may attempt to push for legal changes in some other way, or they may adjust their app management to offer workers more freedom and flexibility in order to avoid lawsuits.

For some workers, the choice between Prop. 22 and current law seems to be a lose-lose proposition. It’s clear that current laws are not providing gig workers with the freedom, flexibility, and protections they need, and voting no on Prop. 22 will not immediately provide them.

However, a “no” vote on Prop. 22 will prevent companies from further limiting flexibility and pay, and it will allow for the amending of existing legislation or introduction of new legislation. The landscape of gig economy regulation is constantly shifting, and workers who want to protect flexibility can advocate for new laws that will both provide pay protections and basic benefits, and meaningfully protect their flexibility.

Voting “no” on Prop. 22 will leave a pathway open for workers all across the spectrum: workers who want to seek employment benefits, and workers who want the freedom and flexibility of being true independent contractors.

In their own words…

Why gig workers who value independent contractor status are voting No on Prop. 22

In spite of the low pay, I chose gig work because freedom is really important to me. I want to choose when I work and the pay rates I’m willing to accept. I’m against Prop. 22 because I think what workers really need is choice. Let us be full independent contractors, with full freedom and basic standards, or just choose to be employees with all the benefits that entails. If Prop. 22 passes, we lose almost all our freedom.

— Jun Fan - Uber Eats / DoorDash / Postmates driver, Berkeley

I know what it’s like to be an employee, and I love being independent. The 9-to-5 grind of putting in thirty or forty years just to make the boss rich is not for me. I notice a lot of others like myself getting into gig work — senior citizens, people of color. Gig work attracts people who might be discriminated against, and it makes sense why. You get to be your own boss and have no one bother you.

But the little flexibility gig work now offers is no longer worth the sacrifices we have to make. There are more rules disguised as flexibility and we’re being paid peanuts. It’s exploitation. If Prop. 22 passes, it will only get worse.

— Denny U. - Instacart shopper, Los Angeles

I’ve had jobs before where I worked as an independent contractor, and gig work now isn’t like that at all — the apps have complete control over your actions. Prop. 22 would only make that worse.

— Kathy Kovesdi - Postmates and DoorDash worker, Los Angeles

As independent contractors, we should be able to set our own rates. If Prop. 22 passes, it will be even easier for companies like Postmates to limit how much we can make. I value being an independent contractor. I don’t want to be locked in with them telling me when to work and how to do it. That’s why I oppose Prop. 22.

— Lavelle Jackson - Postmates worker, Rialto

The only reason we have the flexibility we do now is because of CA’s laws defining independent contractors. Right now, I can work the hours that pay best. If Prop. 22 passes, Instacart will be able to make us use a schedule again. They will be able to penalize us for dropping hours. A big part of the way I make decent money is that I can pick and choose batches — but if Prop. 22 passes, they can kick us off for declining too many batches. They may even go back to requiring an 80% acceptance rate. They are writing the law — they can do anything they want.

There’s a reason the companies known for exploiting workers the most are the ones behind Prop. 22. We need to fix the law, but you don’t fix it with a poorly written law that is written and funded by gig companies themselves. What we really need is a way for independent contractors to get protections ourselves, and make companies more transparent.

— Krystal A. - Instacart shopper, Bay Area

Make sure gig workers & voters read between the lines of Prop. 22 before they cast their ballot — click here to share this report on Facebook, or here to share it on Twitter.