California's ballot initiative, Proposition 22, passed by a 58 - 42 margin. What does this mean for other states?
What is Proposition 22?
Proposition 22 was designed to create an exemption for app-based ride-sharing and food delivery companies from a new California law called Assembly Bill 5. AB5 created a new, strict test to determine whether a worker is an employee or contractor. Uber and Lyft spent over $200 million to pass this amendment in order to keep their drivers from being classified as employees, which would entitle them to all the guaranteed employee benefits under California's labor code, such as worker's compensation.
Prop 22 restricts the exemption to companies that offer app-based transportation or delivery services. This means that many other gig economy workers are still covered by AB5 and considered employees rather than contractors under the new, stricter test. If your organization has contractors operating in California, it is important to make sure that you know whether they should now be classified as employees and therefore given all the benefits required by CA labor laws, such as full reimbursement of business-related expenses.
What will other states do after Prop 22?
Most states do not have labor laws like AB5, but some, such as Massachusetts, do. Massachusetts created a law in 2004 that applied a strict test to determine whether someone is a contractor, and companies like Uber, Lyft, and Doordash could target this law for an exemption similar to the one delivered by Prop 22.
The bottom line is that it is vital for your organization to know the labor laws in all the states where your workers operate. It is vital to anticipate how those laws could change in the future and how this might affect your operations.
If you have employees operating in a state that has employee friendly labor laws, and these employees operate a personal vehicle as part of their job, there is a good chance that you could be violating those laws if you do not provide a sufficient reimbursement for their vehicle expenses. We're not talking strictly about app-based drivers, who are considered contractors in most states, but anyone who drives a personal vehicle for work purposes.
Now is a great time, with the uncertainty surrounding labor laws and the economic pressures from COVID-19, to revisit your organization's policies regarding vehicle reimbursements, such as a car allowance or mileage rate. Now is a great time to ensure that your reimbursement method fully complies with the laws of all states where your employees operate.