Even before COVID-19 hit last year, food delivery apps such as Caviar and Postmates had gained popularity as a convenient and relatively quick way to order food without the hassle of long lines or even needing to leave home. After the pandemic led to shelter-in-place orders and temporarily closed indoor dining in several states, there was an even greater demand for these food delivery services that provided a safe alternative to going out to eat or walking inside a restaurant to pick up a carry-out order. Additionally, even though these delivery apps are run by large corporations, this technology made it easier for diners to support local restaurants at a time when their patronage was even more impactful.
According to MarketWatch, in the six months between April 2019 and September 2019, four of the major delivery app services – DoorDash, Uber, Grubhub, and Postmates – collectively brought in $2.5 billion in revenue. In the same time period the following year, which covered the early days of the pandemic, revenue for these four companies more than doubled to a combined $5.5 billion. However, as the popularity of these apps grew, so did the criticism and controversies surrounding their business practices.
All eyes have been on California for the past few years with regard to the laws surrounding this relatively new type of employment and how to classify “gig” workers employed by rideshare and food delivery companies. Originally, companies like Uber and DoorDash were able to cut operating costs by hiring independent contractors as opposed to full-time employees. By doing so, these companies were able to deny their workers minimum wage, and workers were not guaranteed employment protections such as paid sick leave or overtime pay.
In 2019, the California Legislature passed Assembly Bill 5, which was an important step forward in ensuring that large companies were providing fair compensation and benefits to their workers. The legislation, which took effect on January 1, 2020, codified the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles that set a stringent three-prong “ABC” test for when it is possible to classify workers as independent contractors. Under Dynamex and Assembly Bill 5, in order to be considered an independent contractor the worker must be A) free from control and direction of the hiring company, B) perform work outside the usual course of business of the hiring company, and C) be independently established in that trade, occupation, or business. This bill makes it difficult to classify gig workers as independent contractors, as a worker is presumed to be an employee unless they meet all three criteria under the three-prong ABC test.
In response to the passage of Assembly Bill 5 and a court order for Uber and Lyft to reclassify their workers as employees, Uber, Lyft, DoorDash, Instacart, and Postmates poured millions of dollars into campaigning for Proposition 22. This state ballot proposal defined rideshare and delivery drivers as independent contractors and gave the companies the ability to set their own labor and wage policies for these drivers. By creating this carve-out for rideshare and food delivery apps, Prop 22 made these companies exempt from Assembly Bill 5. While Prop 22 provided some protections to gig employees, it did not come close to the level of protection provided to full-time employees under state law. Considered a huge victory for the gig companies, Prop 22 passed in November 2020 with over 58% of California voters supporting the measure.
The “Yes on 22” campaign’s success can largely be attributed to its extremely high budget and influential marketing plan. In total, the campaign raised more than $200 million dollars and was the most expensive ballot proposal in California’s history. However, labor groups and many other opponents of Prop 22 have accused the other side of using deceitful marketing tactics to gain support. One of many examples includes allegations that public relations firms working for proponents of Prop 22 created fake political organizations with names like “Feel the Bern” so voters would think the ballot proposal was supported by progressive organizations. Senator Bernie Sanders publicly spoke out against the ballot proposal on Twitter. In one survey, 40 percent of respondents said they voted in support of Prop 22 because they thought voting yes meant supporting the gig-workers’ ability to earn a living wage. In reality, while Prop 22 ensures workers will be paid 120% of the minimum wage, it does not require that workers be paid for the time spent waiting between jobs, or reimbursed for the gas needed to drive between jobs. As a result, drivers have reportedly seen a decrease in pay since the Prop 22 took effect.
The passage of Prop 22 has the potential to have far-reaching consequences for gig-workers – not just for the 1 million gig-workers in California, but also for gig-workers across the country. The past year has highlighted just how big a role gig-workers play in the modern economy, and states will likely look to California as they decide how to classify this newly formed group of employees that emerged from mobile app delivery services and rideshare platforms.
* Emma Bunin is an Associate Editor on the Michigan Technology Law Review.