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California passes Prop 22: Uber and Lyft drivers remain independent contractors

Gig economy companies win big after California passed Proposition 22. Yahoo Finance’s Alexis Keenan weighs in.

Video Transcript

AKIKO FUJITA: On the back of a huge victory out in California, Proposition 22 passing there. This is that ballot measure that would maintain or keep the drivers classified as independent contractors. Alexis Keenan has been following that for us. Alexis, we know a lot of money was poured into this ballot measure. What does this ultimately mean for AB5, which is where the state law is right now?

ALEXIS KEENAN: Hi, Akiko, yes. A lot of money, and I guess it worked in this case. The voters in California saying they in fact, want to keep these At Base transportation workers, like those that work for Uber and Lyft, as independent contractors. But it comes with a caveat. And you mentioned there, AB5. That is the law of the land. It's been the law of in California since January 1st of this year.

Now what it does, is it procures a three-part test to determine whether a worker should be an independent contractor or an employee. But what this Proposition 22 does, is it makes a carve-out, and it exempts these types of workers and really creates kind of a third class of worker in California where they have a hybrid between being an employee and an independent contractor.

So what these companies have agreed though to do, and what makes them a little bit different now under this law that a regular contractor, is they've agreed to still retain that flexibility in timing that the drivers wanted, to be able to just pick up and drive when they want and leave and go home when they want or go elsewhere when they want. Also, the companies have agreed to provide some accident and illness insurance to cover medical expenses and some lost wages for on the job types of accidents and illnesses.

Also, the companies are going to be giving these drivers a stipend towards purchasing private health care coverage. And how much that stipend is will depend on whether the workers work at least 15 or at least 25 hours per week driving for the companies. Also, a minimum wage that will be equal to 120% of the minimum wage right now in California, that is $13. But in 2021, it will be going up to $14 an hour. Akiko.

AKIKO FUJITA: Yeah, Alexis, it is worth noting that this pretty much stays, because you would need at least more than a supermajority to overturn it in California. So it's going to be interesting to see if other states follow as well.