In early November, California’s Proposition 22 passed by a substantial margin with over 58% of the vote. The passage of the proposition exempts app-based transportation and delivery companies from California’s strict independent contractor misclassification ABC test and allows these companies to continue classifying their workers as independent contractors.
Additionally, Proposition 22 allows these app-based transportation and delivery companies to treat their workers as independent contractors for tax and some benefit purposes, while providing some new employment-like protections
What employment-like benefits will app-based workers receive?
- a minimum wage for drivers that is no less than 120% of the applicable minimum wage while driving;
- no deduction of any portion the tips that drivers earn will be allowed
- a health care stipend that will vary based on the weekly time spent driving by a worker
- reimbursement of vehicle costs
- insurance coverage for occupational injuries
Additionally, there will be:
- discrimination protections for drivers and passengers
- background check requirements for drivers
- driver safety training
- required driver rest periods
Essentially, Proposition 22 creates a new class of workers that resemble employees but are exempt from employment classification.
We predict that due to the success of Proposition 22, ballot measures, in other states with strict independent contractor misclassification laws such as New Jersey, New York, and Massachusetts, may be proposed. However, even if these efforts to avoid misclassification claims are successful at the state level, it is not yet clear what will happen at the federal level.
Under President-Elect Joe Biden, employers should know that the new administration wants fair treatment of workers and will address worker misclassification. However, the administration will also acknowledge the realities of gig business and the use of independent contractors, remote and distributed workers. Thus, a federal ABC test is not likely, especially as the nation looks to address economic recovery during the COVID-19 crisis.
How federal agencies like the Department of Labor and Internal Revenue Service will treat ridesharing companies under the Biden administration remains to be seen. It’s safe to say, however, that the current administration’s support of misclassification policies will shift. While change is upon us, it is early and not easy to predict what’s ahead at the federal level. Most likely the new administration will rely on federal agencies like the IRS, NLRB and EEOC to address worker misclassification while states continue to proceed independently.
How iWorkGlobal Can Help
Whether your contingent workforce needs a pulse check to ensure it is operating compliantly now or in the future, the experts at iWorkGlobal can ensure that your U.S. and international programs are up-to-date with the latest worker classification regulations. Check out these three simple steps to learn how.