Yet another challenge to the gig economy

The Service Employees International Union is asking the California Supreme Court to overturn the voter-approved Proposition 22. Their effort should be denied.

The legal challenge is the latest in a years-long battle over the gig economy and in particular app-based transportation companies in California.

Such services have allowed for often much lowercost transportation than taxi cabs for consumers and lower barriers to entry for people wishing to earn extra income driving people around or delivering food. It was inevitable that with their growing popularity would come extra scrutiny from governments in California and labor unions in the state.

Though companies like Uber and Lyft have long promoted themselves to potential drivers as providing an opportunity for additional company, and anyone driving for them did so after learning they would be independent contractors (not employees), politicians and unions alike became increasingly critical of such an arrangement.

In 2018, the California Supreme Court issued a landmark decision in a case involving delivery drivers who were contracted by delivery company Dynamex. The court ruled the workers were misclassified and provided an “ABC” test outlining the conditions under which workers can be hired as independent contractors.

The California Legislature followed up by codifying the decision, while seemingly arbitrarily exempting large numbers of industries from the law. The law, Assembly Bill 5, introduced by former labor union leader Assemblywoman Lorena Gonzalez, D-San Diego, was signed into law in 2019.

Gov. Gavin Newsom praised it in his signing statement and said it was only the first step toward making it easier for more Californians to join unions.

AB5 managed to do far more harm than good. Once applied, it proved to be both overly sweeping and remarkably inconsistent. It managed to threaten the livelihoods of session musicians and translators, ostensibly on principle, while carving out industries with effective lobbying teams.

The Legislature has since further gutted the law.

In November, though, voters approved a specific carveout for app-based transportation companies. Prop. 22 was approved with the support of 59 percent of California voters.

Though it would have been preferable for the Legislature to just repeal AB5 outright, Prop. 22 presented a clear alternative to the voters.

AB5 managed to do far more harm than good. Once applied, it proved to be both overly sweeping and remarkably inconsistent.

Under Prop. 22 those who drive for app-based transportation companies would continue to work as independent contractors, but would be entitled to minimum earnings guarantees (of 120 percent of the minimum wage per hour), health insurance subsidies and other benefits.

Voters read that, liked it and approved it.

Naturally, critics of the flexibility of the gig economy were not pleased with that outcome.

So now they’re suing. “Prop. 22 doesn’t just fail our state rideshare drivers, it fails the basic test of following our state constitution,” said Bob Schoonover of the SEIU, according to the Associated Press.

Ultimately, the courts will do whatever they will do. Either way, in the interest of preserving worker freedom and encouraging innovation, we encourage the state to rethink its approach toward the gig economy and repeal AB5.