III. GIG WORKERS AND THE PROBLEM OF EMPLOYMENT CLASSIFICATION
Before the pandemic, meaningful changes to the status of gig economy workers were incremental and accomplished through a patchwork approach.94 Over the past five years, gig workers have brought legal cases around the world, seeking to obtain the same benefits and legal protections as traditional employees. The results, however, have been far from uniform. 95 Numerous courts, such as those in Italy and France, have looked at the amount of control and surveillance that platforms have over workers and have concluded that employment protections should apply.96 Other courts, relying on gig workers’ flexibility to set their own hours and the fact that gig workers often supply their own equipment, have instead determined that gig workers are independent contractors, or in the United Kingdom, fit into the third intermediate category of “worker,” which provides many (but not all) of the same rights and benefits as employees.97
During the past decade, platform economy companies have not only disrupted established business and labor models, but also have challenged the legal tests and structures traditionally used
Sweatshop?, PRICEONOMICS (July 3, 2013), https://priceonomics.com/who-makes-belowminimum-wage-in-themechanical/#:~:text=Roughly%20half%20of%20the%20Mechanical,covered%20by%20most%20labor%20laws; Berg, supra note [ ] at 24. 94 Miriam A. Cherry, A Global System of Work, A Global System of Regulation?: Crowdwork and Conflicts of Law, 94 TUL. L. REV. 183 (2020).
95 *Id. *
96 Cour de cassation [Cass.] [supreme court for judicial matters] soc., Mar. 4, 2020, Bull. civ. V, No. 374 (Fr.); Italy Court Rules Uber Food Delivery Riders Were Exploited, ASSOCIATED PRESS (May 30, 2020), https://apnews.com/article/62609b97fbc25575cb1fcc2573db48f1; see also Sam Schechner & Preetika Rana, *Uber Ruling in France Boosts Gig Workers’ Rights, *WALL ST. J. (Mar. 4, 2020, 3:35 PM), https://www.wsj.com/articles/france-uber-ruling-puts-gig-workersrights-in-focus-11583353513.
97 See Aslam Farrar v. Uber BV, UK Sup. Ct. 5 (2021) (“Taking these factors together it can be seen that the transportation service performed by drivers and offered to passengers through the Uber app is very tightly defined and controlled by Uber.”).
for employee classification. 98 In the United States, as in many countries, employee status is an important gateway to determine which workers will receive the protection of the labor and employment laws, including the right to organize and bargain collectively, eligibility for minimum wage, unemployment insurance, and worker’s compensation.99 As such, classification as an employee is crucial in ensuring decent standards and working conditions.100
The on-demand model of work does not fit neatly into binary categories. In Cotter v. Lyft, Judge Vince Chhabria characterized work in the on-demand economy as handing the court “a square peg and asked to choose between two round holes.”101 With its flexible “open call” that allows workers the flexibility about when and how to work, combined with algorithms and customer ratings that track and surveil every move that the worker makes, the gig-work model combines some aspects of the employment relationship and some aspects of the independent contractor relationship.102 As the initial round of cases against platform companies settled out of court in California, 102 the gig model would offer a shakeup of the test that might be used in order to sort out these types of employee misclassification issues.
A. The California Supreme Court’s Dynamex Decision
In 2018, the California Supreme Court announced its decision in Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County (“Dynamex”).104 The court announced a new standard for determining employment status in the state of California, known as the “ABC” test due to its three factors. While the ABC test for employee status was new to California, it actually was an older test for employee status used in many jurisdictions.105 The first part of the test, Part A, embodied the traditional control test, asking whether the worker was free from the “control and direction of the hirer in connection with the performance of the work[.]”106 Part B of the test declared that to be an independent contractor, the worker would have to perform work
98 Ulysse Lojkine, Cartographier la geopolitique des plateformes, LE GRAND CONTINENT (Feb. 19, 2020), https://legrandcontinent.eu/fr/2020/02/19/geopolitique-des-plateformes/ (providing summaries of various jurisdictions and their differing approaches to worker classification in the gig economy). For additional background to the problem of worker classification in the ondemand economy, see Valerio De Stefano, The Rise of the “Just-in-Time Workforce”: OnDemand Work, Crowdwork, and Labor Protection in the “Gig-Economy,” 37 COMP. LAB. L. & POL’Y J. 471 (2016).
99 Miriam A. Cherry, Beyond Misclassification: The Digital Transformation of Work, 37 COMP. LAB. L. & POL’Y J. 577 (2016).
100 De Stefano, supra note [ ].
101 Cotter v. Lyft, 60 F. Supp. 3d 1067, 1081 (N.D. Cal. 2015).
102 *Id. *
103 Miriam A. Cherry, Gig Economy: Settlements Leave Labor Issues Unsettled, LAW 360, (June 8, 2016), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2776213.
104 Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County, 416 P.3d 1 (2018).
105 Keith Cunningham-Parmeter, Gig-Dependence: Finding the Real Independent Contractors of Platform Work, 29 N. ILL. L. REV. 379 (2019).
106 Id. at 418.
“outside the usual course of the hiring entity’s business[.]”107 In other words, Part B required that there truly be some division between the hiring company’s business and the type of work that the hiring company required the putative independent contractor to perform. Finally, Part C asked whether the worker was customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.
The Dynamex decision was a catalyst for many of the political events that would ensue in California, even though the hiring entity in Dynamex was not itself a digital platform. Further, the court’s ruling was limited in the sense that it only applied to California wage orders.108 Nonetheless, the Dynamex decision touched off a heated debate about the nature of the employment relationship, which groups of workers should be covered by labor and employment laws, and what the Dynamex decision might mean for businesses around the state, including platform economy businesses. The reason for the attention was that the new ABC test that the Dynamex court adopted was quite expansive, and its practical effect would be to make many more workers employees.109 Of the three parts of the test, it was noted that Part B would likely cause problems for the gig economy.110 If the business of a platform company was to provide passengers with rides from one part of the city to another, and the rideshare drivers were providing it, it would be very difficult to argue that the drivers were somehow not involved in a fundamental part of the platform’s business. In fact, the European Court of Justice had previously heard similar types of arguments, and soundly rejected Uber’s attempt to argue that it was a software provider removed from the business of transportation.111
In the wake of the Dynamex decision, gig economy companies began to lobby the California legislature to change the coverage of the employment law statutes, and so did labor unions. 112 Gig economy companies wanted a legislative overhaul to the Dynamex decision, one that would either change the test to a more relaxed standard for finding independent contractor status, or one that would present a clear “carve out” to the law for on-demand platform companies. At the same time, labor unions pressed the legislature to codify the Dynamex ruling and the expanded ABC test for employee status.113
B. California Legislature Passes AB-5
It was in the midst of this charged political context in 2019 that the California legislature
107 Id. at 413.
108 Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County, 416 P.3d 1 (2018).
109 Cunningham-Parmeter, supra note 105.
110 Id..
111 2017 E.C.R. C-434/15 (“Uber is therefore not a mere intermediary between drivers willing to offer transport services occasionally and passengers in search of such services. On the contrary, Uber is a genuine organiser and operator of urban transport services in the cities where it has a presence”).
112 Josh Eidelson, The Gig Economy is Coming for Millions of American Jobs, BLOOMBERG L. NEWS, Feb. 17, 2021.
113 Steve Smith, Labor Joins Gonzalez Fletcher to Introduce New Bill to Protect Workers from Misclassification, CAL. LABOR FED’N (Dec. 3, 2018), https://calaborfed.org/labor-joins-gonzalezfletcher-to-introduce-new-bill-to-protect-workers-from-misclassification/.
passed, and California Governor Gavin Newsom signed, the AB5 Bill, which adopted Dynamex’s expanded ABC test for employee status.114 The text of AB5 cited the “harm to misclassified workers who lose significant workplace protections,” the loss of revenue to the state, and the unfairness to companies that compete with companies that misclassify workers as the reasons behind the decision to expand coverage.115 AB5 also expanded the Dynamex ABC test holding beyond its original purview of wage orders.116 Under the provisions of AB5, the ABC test would apply to all aspects of the California Labor Code, including unemployment, collective bargaining, and anti-discrimination law.117
Many businesses lobbied for, and received, exemptions from AB5’s coverage, meaning that whether those businesses had hired employees would be based on the prior control test that had been in force before the decision in Dynamex. Some of these exempted occupational categories included the professions, typically highly skilled labor. Those exempted included lawyers, accountants, engineers, architects, investment advisors, physicians, surgeons, dentists, psychologists, and veterinarians.118 But some of the exempted occupations included occupations that were outside the highly paid professions: direct salespeople, private detectives, fishermen, real estate agents, and hair stylists.119 These carveouts from the ABC test were difficult to harmonize, as many of these careers had little in common, except that those employers had been able to lobby successfully for an exemption. Despite some of these uneven exemptions from the law, worker rights advocates largely hailed the California legislature’s passage of AB5 as a progressive and forward-thinking change. Under Part B of the ABC test, it appeared that gig workers would finally be included in AB5’s expanded definition of employee.120 Many worker advocates followed the situation closely to see what an employee-centered gig work model might look like.
Uber and Lyft, however, categorically refused to comply with AB5. In fact, the major platforms did not take any action to comply with the change in the law or reclassify their workers as employees. Rather, when the AB5 bill came into effect on January 1, 2020 Uber and Postmates filed a lawsuit in federal court challenging its constitutionality.121 On-demand companies then began negotiating with California lawmakers to create a third hybrid category, which would offer some employment rights to gig workers, even if those were not “full” employment rights. Meanwhile, the companies stalled about changing their business models and, pointing to the ongoing lawsuits, refused to implement the new employee status. Later in that year, during the 2020 pandemic, rideshare company Lyft threatened to cease operations in California if it were required to comply with AB5.122 In the meantime, California municipal attorneys general began
114 Richard Gonzales, California Governor Signs Law Protecting Gig Economy Workers, NAT’L PUB. RADIO (Sept. 18, 2019, 7:14 PM), https://www.npr.org/2019/09/18/762108954/californiagovernor-signs-law-protecting-gig-economy-workers.
115A.B. 5, 2019 Leg., Reg. Sess. (Cal. 2019).
116 *Id. *
117 *Id. *
118 A.B. 5, 2019 Leg., Reg. Sess. (Cal. 2019).
119 *Id. *
120 Cunningham-Parmeter, supra note 105.
121 Olson v. California, No. 19-CV-10956, 2020 WL 905572 (C.D. Cal. Feb. 10, 2020).
122 Kate Conger, Uber and Lyft Get Reprieve After Threatening to Shut Down, N.Y. TIMES (Aug. 20, 2020), https://nyti.ms/2QarROv.
filing lawsuits seeking injunctions against Uber and Lyft to get them to comply with the law. 123 These lawsuits requested that the gig companies take action to reclassify their workers and begin providing employment protections and benefits, or else be ordered to do so by the courts. The attorneys general were successful at both the trial and appeals court level, but Uber and Lyft’s attorneys kept drawing out the process to request more time.124
C. The Proposition 22 Campaign
Meanwhile, Uber and Lyft engaged in delaying tactics until there could be a vote on Proposition 22 in November 2020. Along with a coalition of other gig companies, Uber and Lyft declared their intention to fight AB5 through a ballot initiative, eventually known as Proposition 22. Gig economy companies contributed over $200 million to exempt on-demand companies from AB5 and to keep gig workers as independent contractors.125 While unions and groups of gig workers strongly opposed these efforts in grassroots campaigns, they were outspent by more than 20 to 1 in the leadup to the November election season.126 Uber and Lyft portrayed the issue as one of flexibility, arguing that their drivers did not want to become 9 to 5 employees. The platforms also argued that if the proposition was voted down, then operations might no longer be financially sustainable, and costs for the average user might rise rapidly. As part of the campaign in favor of Proposition 22, Uber and Lyft amplified the voices of some of their drivers who wanted to work on flexible schedules, and featured these drivers in their adverting campaigns. 127
In addition, rideshare apps themselves started to feature advertisements in favor of Proposition 22, which told customers that their drivers supported the measure and should talk to them about why it was important to vote “yes.” 128 DoorDash drivers were instructed to deliver branded bags that had pro-Proposition 22 messages on them, which could understandably have made customers believe that the workers favored its passage as well.129 Other restaurant and food delivery services directed their workers to include political leaflets asking for a vote of “yes” on Proposition 22 along with the meals and food that they dropped off.130 Some California
123 People v. Uber Techs., Inc., 56 Cal. App. 5th 266 (Cal. Ct. App. 2020).
124 Id.; See also Sara Ashley O’Brien, Uber and Lyft must reclassify drivers as employees, appeals court finds, CNN, (Oct. 23, 2020), https://www.cnn.com/2020/10/23/tech/uber-lyftcalifornia-appeal/index.html.
125 Jeremy B. White, Gig Companies Break $200M Barrier in California Ballot Fight, POLITICO (Oct. 29, 2020), https://www.politico.com/states/california/story/2020/10/29/gig-companiesbreak-200m-barrier-in-california-ballot-fight-9424580.
126 Brian Merchant (@bcmerchant), TWITTER (Nov. 4, 2020, 3:37 P.M.), https://twitter.com/bcmerchant/status/1324103506739916801; Kari Paul & Julia Carrie Wong, California Passes Prop 22 in a Major Victory for Uber and Lyft, THE GUARDIAN (Nov. 4, 2020), https://www.theguardian.com/us-news/2020/nov/04/california-election-voters-prop-22-uber-lyft.
127
128 Sam Harnett, *Gig Companies Are Making Their Workers Promote Prop. 22, *KQED, Oct. 20, 2020, https://www.kqed.org/news/11842964/gig-companies-are-making-their-workers-promoteprop-22.
129 Id.
130 Lekach, supra note [ ].
Uber drivers were sent a pop up message that asked them to select “Yes on Proposition 22” or “OK” in order to move forward to working on the app.131 As a result, a group of Uber drivers filed a class action lawsuit complaining that they were given misleading messages about Proposition 22 on the app. The lawsuit alleges that Uber pressured its drivers to follow a particular political course of action, which is against state law in California.132 Nonetheless, these advertisements, flyers, and pop up ads seemed to have had a large impact on customers and the ultimate outcome of the vote.
The fact that part-time employees could also work flexible hours and have part-time schedules was a message that got completely lost in the Proposition 22 campaign rhetoric. The platforms’ message caught on with the California electorate, who were bombarded with advertisements in favor of Proposition 22’s passage. Other voters were concerned because they depended on services like Lyft to get them to and from work, doctor’s appointments, and other situations where transportation was needed, and Lyft’s threats to leave the state may have struck a chord. Other customers may have been worried about the potential increase in cost of various services and simply did not want to pay more. And because Proposition 22 also included some protections for gig workers, many voters who were not the most aware may have thought paradoxically that by voting to approve the measure, they were actually helping rideshare drivers. California voters approved Proposition 22 on November 3, 2020.133
California is viewed as a progressive jurisdiction and would rank as the world’s seventh largest economy on its own. The result took many commentators and politicians by surprise, as most ballot initiatives in California fail.134 Further, the California legislature had just passed AB5 the year before, signifying the political will to expand the category of “employee” to include the vulnerable group of gig workers. As such, when California voters approved Proposition 22 on November 3, 2020, stripping gig workers of employee status and curtailing some of their newly-found rights, it left many labor advocates disappointed and concerned.135
D. The Impact of Proposition 22
As Proposition 22 was a compromise, and promised more rights for gig workers than those that an independent contractor would typically ever receive, it de facto created a new hybrid type of category, even though gig workers would technically still carry the label of
131 Maeve Allsup & Erin Mulvaney, Drivers Sue Over Pressure to Back Gig Worker Measure, BLOOMBERG NEWS, Oct. 22, 2020.
132 Class Action Complaint and Demand for Jury Trial, Valdez et al. v. Uber Tech. et al., No. CGC-20-58726 (Sup. Ct. Cal. San Francisco Cnty. Oct. 22, 2020).
133 Sara Ashley O’Brien, Prop. 22 Passes in California, Exempting Uber and Lyft from Classifying Drivers as Employees, CNN, Nov. 4, 2020, https://www.cnn.com/2020/11/04/tech/california-proposition-22/index.html.
134 CAL. SEC’Y OF STATE, HISTORY OF CALIFORNIA INITIATIVES: SUMMARY OF DATA (2020), https://elections.cdn.sos.ca.gov/ballot-measures/pdf/summary-data.pdf (of the 376 initiatives that qualified for the California ballot between 1912 and 2017, 64% were rejected by the voters).
135 Greg Bensinger, Other States Should Worry About What Happened in California, N.Y. TIMES (Nov. 6, 2020), https://nyti.ms/3l6p72l (“[Prop. 22] will encourage other companies to reclassify their work force as independent contractors, and once they do, over a century of labor protections vanishes overnight,” says Robert Reich, former U.S. Secretary of Labor).
“independent contractor.” Proposition 22 does provide California rideshare and delivery drivers some benefits that independent contractors do not typically receive. For example, under Proposition 22, these benefits and protections include a healthcare subsidy consistent with the average contributions required under the Affordable Care Act (ACA), a minimum earnings guarantee for time worked while actively providing rides, compensation for certain vehicle expenses, and occupational accident insurance to cover on-the-job injuries.136 Proposition 22 also prohibits employment discrimination by rideshare companies and allows gig workers the right to bring an action under California’s anti-discrimination laws.137
These protections and benefits are fairly substantial. Even though Proposition 22 explicitly notes that the on-demand workers are now independent contractors for purposes of California law, they will now receive many more benefits and protections than independent contractors have ever received in any jurisdiction in the United States. It has even led some to call Proposition 22 a “third way” for gig workers.138 But without employee status, there is no right for the drivers to organize or bargain collectively, and other rights (such as minimum wage only for time worked, not while looking for work) offered in this compromise are less than what a California employee would receive. Further, gig companies have already started tacking on fees to its services as a “California Driver Benefits Fee,” and passing them along to customers, a fee designation which was nowhere described in the voting materials.139
Unions have declared their opposition to Proposition 22 and their willingness to challenge Proposition 22 in court.140 The year that the gig economy companies spent in noncompliance is also still being litigated, with California government officials seeking to hold the companies accountable for past violations when AB5 was the law.141 Given the California Legislature’s previous vote in favor of employee status for gig workers, it would not be surprising if there is additional political maneuvering in the coming months and years including further ballot initiatives. And, as mentioned in the last section, gig workers themselves have filed lawsuits alleging that they were ordered to vote in favor of Proposition 22 and to engage in
136 [ ]
137 Id.
138 The idea has been theoretically discussed in the United States, but this is the first attempt to carry it out. For more discussion on this point, see Harris & Krueger, A Proposal for Modernizing Labor Laws for Twenty-First-Century Work: The “Independent Worker,” THE HAMILTON PROJECT (2015) and Miriam A. Cherry & Antonio Aloisi, ‘Dependent Contractors’ in the Gig Economy: A Comparative Approach, 66 AM. UNIV. L. REV. 635 (2017).
139 Levi Sumagaysay, California Post-Prop. 22: Gig Workers to See Pay Changes, Customers to See Higher Prices, MARKETWATCH (Dec. 14, 2020), https://www.marketwatch.com/story/california-post-prop-22-gig-workers-to-see-pay-changescustomers-to-see-higher-prices-11607991899.
140 Sasha Lekach, Uber Tacks on New Fee for Prop. 22 Gig Worker Benefits, MASHABLE (Dec. 15, 2020), https://mashable.com/article/uber-lyft-prop-22-benefits/.
141 Max Kutner, Uber Tells 9th Circuit Prop. 22 Doesn’t Moot AB 5 Challenge, LAW360, (Dec. 9, 2020), https://www.law360.com/articles/1336032/uber-tells-9th-circ-prop-22-doesn-t-mootab-5-challenge.
compelled speech supporting it.142 It would seem that further lawsuits and additional votes may come to pass.
Currently, the *Dynamex *decision itself remains the law for all traditional businesses, other than those that deal with exempted occupational categories, and the gig economy. As such, many traditional businesses have started to complain that gig workers should not be allowed a carve out from the law, when the law was specifically crafted to try to cover them. As a final note, Proposition 22 was the most expensive ballot initiative in California’s history. The enormous lobbying effort behind it has led some to question the wisdom of the initiative process itself. Ballot initiatives were designed as a type of “direct democracy” to allow the average voter, the common person, to have their voice be heard. If the initiative process is dominated by large corporate interests, the very purpose of the ballot initiative process is subverted. Others have expressed concern that this vote undermines minimum labor standards.143 While this particular vote only involved gig workers, the concern is of a slippery slope, as other industries may try to seek similar exemptions from various parts of labor regulation that they do not like or do not agree with.144
The back-and-forth, the advances and the retrenchment of the last decade, highlight the complexity of the issues involved and the interplay of different sources of political power and the ballot initiative process within California. For now, the process will play out and the hybrid independent contractor category will be watched closely. Further, the story will continue to evolve in the coming year. Without a doubt, Uber and other gig economy companies will likely introduce copycat legislation in other states or utilize the ballot initiative processes in those states. 145 Meanwhile, some are looking for support from the new administration coming to power. President Biden has been a vocal proponent of the ABC test for employment status and has proposed extending it nationally.146 The Department of Labor has already rescinded the Trump administration proposed guidance about employee classification for purposes of the Fair Labor Standards Act.147 Similarly, the Biden National Labor Relations Board will likely reverse the Trump administration’s ruling that gig workers were not employees, and could not organize.
Paradoxically, events during the 2020-2021 coronavirus pandemic may actually help gig
142See Allsup & Mulvaney, supra note [ ]; Class Action Complaint and Demand for Jury Trial, Valdez et al. v. Uber Tech. et al., No. CGC-20-58726 (Sup. Ct. Cal. San Francisco Cnty. Oct. 22, 2020).
143 Josh Eidelson, *The Gig Economy is Coming for Millions of American Jobs, *BLOOMBERG L. NEWS, Feb. 17, 2021.
144 Greg Bensinger, Other States Should Worry About What Happened in California, N.Y. TIMES (Nov. 6, 2020), https://nyti.ms/3l6p72l (“[Prop. 22] will encourage other companies to reclassify their work force as independent contractors, and once they do, over a century of labor protections vanishes overnight,” says Robert Reich, former U.S. Secretary of Labor).
145 Braden Campbell, 3 Takeaways as Gig Cos. Prevail at Polls on Worker Status, LAW360 (Nov. 4, 2020), https://www.law360.com/articles/1325919/3-takeaways-as-gig-cos-prevail-atpolls-on-worker-status.
146 Ronald Zambrano, How Biden May Save Gig Workers From California’s Prop 22, LAW360 (Dec. 16, 2020), https://www.law360.com/articles/1335406/how-biden-may-save-gig-workersfrom-california-s-prop-22.
147Max Kutner, DOL Pulls Trump-Era Guidance on Contractors, Truckers, LAW360, Feb. 19, 2021.
workers in their quest for parity. During the 2020 pandemic, the treatment of gig workers was coming closer to parity with traditional employees, through programs like extended unemployment assistance, which was extended to platform workers in the CARES Act. Instead of seeing gig work as disposable, it seems that many of the food delivery, rideshare, and grocery apps are now starting to be understood by both lawmakers and the public as essential work. The next portion of the Article will talk about this paradigm shift to essential work, and what it might mean for the future of worker rights in the gig economy.
Table of Contents
- I. INTRODUCTION
- II. GIG WORKERS - A STUDY IN PRECARITY
- III. GIG WORKERS AND THE PROBLEM OF EMPLOYMENT CLASSIFICATION
- IV. Gig Workers as Essential Workers
- V. THE ARGUMENT FOR PARITY
- VI. CONCLUSION