Gig

Prop 22 reversal: the future of the gig economy is up in the air (again)

Tuesday, August 24, 2021 by Robinhood Snacks | Disclosures
_When the Uber is 57 minutes away: Plan B [Westend61 via GettyImages]_

When the Uber is 57 minutes away: Plan B Westend61 via GettyImages

Just when you thought it was over... Think again. The CA gig-worker law saga has more sequels than Fast & Furious. On Friday, a California judge ruled that Prop 22 is unconstitutional and unenforceable. In November, CA voters overwhelmingly passed the ballot measure, which has classified gig drivers as independent contractors.

  • The most expensive ballot measure in CA history: Uber, Lyft, DoorDash, Instacart, and others spent more than $200M to support Prop 22. Uber and others say their drivers largely back the prop, but labor unions say it's a bad deal for workers.
  • Next steps: Gig companies are appealing the ruling, and won't have to immediately reclassify workers. But it's a major wrinkle in their effort to preserve the gig model.

9 to 5 at Uber Eats... Means no moonlighting for Grubhub. With Prop 22, gigs drivers gained new benefits like: health insurance if you work at least 15 hours per week, at least 120% of minimum wage, and 30 cents reimbursed per mile driven. If Prop 22 is overturned...

  • For drivers: Drivers would get full-time benefits (think: sick leave and PTO). But because they'd be employees, they would have to work a set schedule of hours, and could lose the flexibility to work multiple apps.
  • For consumers: Expect even higher prices and longer waits. To fund a more expensive workforce, companies would pass costs to consumers and may cut drivers. Ride-hail prices have already soared 53% in the first half of this year due to driver shortages and the new Prop 22 benefits.
THE TAKEAWAY

The gig economy is at existential risk... If the CA judge's ruling is upheld, chronically unprofitable apps like Uber and DoorDash would likely become even more unprofitable. As the most populous US state, California is a critical market for gig companies — and its decision could shape gig law across the country. A Prop 22-like ballot will be voted on in Massachusetts next year. The outcome of CA's ruling could set a precedent.