What Uber, Lyft Prop 22 win could mean for the future of all freelance work

Rideshare driver Jesus Jacobo Zepeda of Lancaster, California takes half in a rally as half of a statewide day of motion to demand that ride-hailing corporations Uber and Lyft observe California legislation and grant drivers “basic employee rights”, in Los Angeles, California, U.S., August 20, 2020.

Mike Blake | Reuters

California voters gave Uber and Lyft a big win in the fight over the future of gig economy workers, approving Proposition 22, but it is not only the tech giants and freelancers delivering people and food who expect major repercussions from the ballot decision.

Independent contractors across the country might breathe a sigh of relief in that California voters sent a message to the state’s legislators that AB 5, the law which was enacted to classify freelancers as employees, is widely unpopular. Other states, including New Jersey, Massachusetts, New York and Illinois, have been among those considering crafting legislation to force companies to deem freelancers as employees. Now those states can more clearly see the risks, experts say.

“It will not go away, however it is going to be revisited and take a look at rather more carefully,” said Miles Everson, CEO of MBO Partners, which is a consultant to the independent contractor community. The overriding message that Prop 22 sends is that “one measurement matches all” legislation which lumps all freelance professions together doesn’t work and won’t be popular with voters.

AB 5’s problems were already well-known, as California was forced to create roughly 100 carve-outs for various professions to be exempt from the law. That included many unskilled workers “in the zone of the massive guys taking benefit of the little guys” Everson said, but also the independent contractors a firm like MBO Partners serves: solo entrepreneurs building their own businesses, making six-figures and holding advanced education degrees in many cases.

“It’s an vital societal subject,” Everson, whose firm supports a more detailed set of self-employed guidelines, said, noting more people are working as freelancers today and growth continues, but AB 5 has not been a good solution. “This isn’t just about Uber and Lyft. It’s about individuals who wish to construct their very own enterprise. … High-end data employees producing six figures must be blissful about the choice.”

“But it is from over,” he said. “Working populations have totally different wants and traits and it’s essential separate that out for totally different cohorts of employees, and unto they do it, there might be extra swings in the pendulum. It’s a step in the direction of compromise, however a a lot bigger step highlighting the have to not generalize laws.”

Steve King, a partner at small business and independent contractor consulting firm Emergent Research, thinks it will influence action in other states. “It will dampen enthusiasm for AB5-like legal guidelines elsewhere and I feel will scale back possibilities of the [current version of the] Pro Act at the federal degree, even when Biden wins,” he said. “Prop 22 received fairly massive.”

For freelancers based outside of California this result is useful, he said, because it is another reason to not pass an AB 5-type law unless lawmakers are very careful with it. That will deter other states from going down the AB 5 path. “This vote reveals you’re going to get pushback wherever they might strive one other AB 5. This was a fairly clear slap in the face of AB 5,” he said, adding, “had it failed, it might have been more likely different states go together with an AB 5.”

Misclassification of workers remains a serious issue, and freelance, which now represents 12% to 15% of the labor force in the U.S., will continue to grow as part of the labor force and laws around the country remain confusing.

This vote shows you will get pushback wherever they would try another AB5. This was a pretty clear slap in the face of AB 5.

Steve King

Emergent Research partner

Kim Kavin, co-founder of the non-partisan Fight for Freelancers group, and a freelance writer and editor based in New Jersey, stated, “Everybody is celebrating immediately. All the mayhem in federal election outcomes … we’re simply thrilled about this one outcome.”

She added that while all the focus is on the win for Uber and Lyft, “we see this as a serious win in a much bigger battle, we see the voters standing with us. …  We certain hope it has an impression on New Jersey policymakers … and at the federal degree.”

King favors a well-crafted federal law to provide clarity. A version of the Pro Act, which has been criticized by the freelance industry in its current form, which is written to be more freelancer-friendly and identify truly independent contractors, is needed, he said.

“The best manner can be at the federal degree, even when not enacted as legislation,” Everson said, adding Department of Labor guidelines can help, though they can also change from administration to administration. President Trump‘s DOL has proposed new worker misclassification guidelines.

Within California, the impact of Prop 22 is limited for now. While traditional logistics companies could be next to make the case that they are app-based, like an Uber, many freelancers across professions are still subject to AB 5 and that won’t change.

“AB 5 has simply been a multitude. It was well-intentioned … however was poorly written and obscure,” King said.

But he is more hesitant to say the decision is a clear-cut political win for all freelancers, though he expects many will make that case. He said Prop 22 was too narrow, and too focused on drivers, to have certainty that it will define the fight to come over freelance. It does provide talking points to political interests that want to show voters don’t want workers forced into traditional jobs. But he said his firm’s survey work shows that the average voter really did view Prop 22 as an “Uber/Lyft” subject.

California “nonetheless a multitude” for freelancers

Within California, the situation for many freelancers, “continues to be a multitude,” according to King. And rather than lead state legislators to reconsider their stance, it could “simply make a bunch of politicians madder,” he said.

Many of the repercussions of AB 5 already in California will remain issues, such as companies scared about violating AB 5 and getting hit with big fines opting for full-time employees or to hire freelancers out of the state or out of the country. And for freelancers in California, a very confusing law remains.

“AB 5 continues to be the legislation,” he said, with a new carve-out for drivers. “And it’s the weirdest legislation ever written possibly in California, and impacts so many individuals.”

Harry Campbell, known as The RideShare Guy and a consultant to gig economy workers, said his survey work among drivers showed that many do want to be independent contractors. A September survey found 60% of drivers in favor of Prop 22. Those that will benefit the most from Prop 22 are part-time drivers who value the flexibility of the hours, he said.

Emergent Research’s King said amongst the most-effective Uber and Lyft-sponsored ads were those featuring drivers speaking in support of Prop 22.

“It’s straightforward to level to the sheer quantity of cash spent by the ‘Yes on 22’ coalition and say that was the cause it handed however I’m not so certain,” Campbell said. He noted that spending on past ballot initiatives had actually hurt them in places like Austin where voters turned out against the companies and many felt they were bombarded with messaging.

The results don’t bode well for similar efforts in other states supported by traditional labor unions, at least related to his world of drivers. “Labor took a swing for the fences in California with AB 5 and now the corporations have proven in the event that they spend sufficient cash, they’ll take their case to the voters and cross a proposition to maintain drivers as unbiased contractors. I count on many states will work to discover a compromise between labor and gig corporations that retains drivers categorised as [independent contractors] ICs however affords them some advantages.”

AB 5 is not a roadmap

King said there might be some moral victory for California freelancers, and the legislature more willing to do even more carve-outs, and a reduction in the aggressive of state enforcement of AB 5, but “the AB 5 drawback stays.”

Jim Manley, a lawyer with the Pacific Legal Foundation, which is currently representing associations of journalists and photographers in an AB 5 case under appeal in California, said Prop 22 shows that voters agree with the backlash that has existed about AB 5 ever since it was proposed.

“We ought to depart it as much as employees to resolve on the way to construction a enterprise. … that is nice information for rideshare corporations, nevertheless it additionally sends a transparent message from voters that they do not help insurance policies like AB 5, which is unhealthy public coverage.”

He said all the exemptions already added to the legislation show the lack of care that went into writing it, and that efforts like Prop 22 are not a long-term solution.

“My sense is voters need extra employee freedom and do not assume the option to obtain it’s by way of piecemeal carve-outs for industries,” Manley said, adding “if we go that route, we are going to proceed down the similar street we have been on.”

That implies industries with enough political pull or enough resources to mount a big lobbying battle will get their carve-outs, but “it would not assist freelance comedians who haven’t got a coalition,” Manley said.

He does not expect the lawmakers who wrote AB 5 to admit mistakes in any more significant way than all of the exemptions they have had to add already, but he agreed with the other experts that it will make lawmakers beyond California more wary.

“The message Prop 22 sends is to pump the breaks on AB 5-type laws and assume extra fastidiously about how your affecting the individuals you are attempting to assist,” he said. “Policy makers want to check out what occurred with Prop 22 and ask, is that the battle you wish to have? The relaxation of the nation can be taught from California.”

New Jersey-based freelancer Kavin said worker misclassification is a big problem, and clarity at the federal level would help, but “AB 5 isn’t a roadmap.”

She said the Pro Act under consideration by Democratic leadership and supported by Biden represents the interests of unions like the AFL-CIO and the political powers have not even offered freelancers “a seat at the desk” in crafting legislation that represents their interests.

“As massive and costly as Prop 22 was, hopefully it will get them to listen to us,” she stated. 

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