The California Supreme Court’s unanimous decision last month to uphold the constitutionality of Proposition 22 deserves two cheers. And provides some benefits to drivers. The ruling is a huge win for the gig economy, allowing Uber, Lyft, DoorDash and others to continue to provide valuable services.
Why should I keep that precious third hurray? In 2018, a state high court overreaching ruling against Dynamex set off a damaging row over independent contracts. In that case, the courts also unanimously concocted the “ABC test” to determine whether a company could use contractors as workers. There is no need to discuss the specifics of the test, but companies can only hire independent workers under narrow circumstances.
That sparked a six-year campaign by California Democrats and their union puppet masters to essentially shut down the state’s entire freelance industry. Under the leadership of then-Assembly Member Lorena Gonzalez (now appropriately the leader of the state coalition), the Legislature passed Assembly Bill 5 to codify the Dynamex ruling. The layoff notices later attracted attention as companies began laying off freelance workers in the state.
It’s an effort to combat “wage theft,” as Democratic leaders describe it — companies hiring contractors and freelance workers to circumvent the state’s raft of labor laws and mandatory benefit rules. In fact, this was an orchestrated effort by state unions to stifle competition by reinventing alternative business models. Contractors and freelance workers have a hard time organizing, so unions do what they do best: destroy stuff.
It’s easy to forget now, but the ban on independent contracting cast a wide net, causing disruption in all walks of life. Many workers already receive employee benefits (the purported reason for restrictive contracts), but all but force them to give up extracurricular money-making activities. The ban resulted in musicians, actors, photographers and many others losing their jobs.
To make matters worse, the state stepped up enforcement of AB 5 during the pandemic, jeopardizing work from home (and food delivery) while most Americans were struggling to make ends meet during state stay-at-home orders.
This is so despicable. The situation is made worse by the callous, “let them eat cake” attitude of Gonzalez and other government workers, who don’t care that most of their fellow citizens don’t have taxpayer-provided paychecks to fall back on. Gonzalez famously tweeted: “These are never good jobs. No one has ever suggested such a thing, not even freelancers.” However, most freelancers I know prefer this The flexibility to work instead of a 9-to-5 schedule in a salt mine or a cubicle.
Survey after survey—not to mention anecdotal evidence from talking to any Uber driver—shows that the vast majority of these drivers like being able to set their own schedules and do it in between other jobs or classes. Earn a little extra cash in between. The Legislature relented, excluding more than 100 industry categories from AB 5 (although it refused to make concessions to the trucking industry, despite its importance).
Then the ridesharing industry showed real mettle by getting Proposition 22 onto the statewide ballot. California’s Democratic-leaning voters supported the measure by a margin of 59% to 41%, but unions, Gov. Gavin Newsom and Democratic leaders showed an almost Trumpian refusal to admit defeat and move on. manner.
These companies challenged AB 5 on federal grounds, arguing (correctly, I believe) that the Legislature was targeting these specific companies. A three-judge panel of the Ninth Circuit Court of Appeals agreed with the ruling, but the ruling was overturned by an 11-judge panel. The U.S. Supreme Court rejected Uber’s appeal, and things look bleak from there. I wasn’t expecting much from it, given the original California Supreme Court ruling, but I was surprised.
As legal website JDSupra explains, the court’s July 25 ruling “reaffirmed that Proposition 22 does not infringe upon the California Legislature’s authority to regulate the workers’ compensation system.” These app-based ridesharing and delivery companies can continue to operate without converting drivers into permanent employees. This is a huge relief to industry and California consumers.
But the publication noted that “the Legislature may consider extending workers’ compensation benefits to drivers and making such benefits mandatory.” Given the political power of state unions, I wouldn’t expect lawmakers to continue attacking the industry . At some point, however, even Democrats may want to say “enough is enough.”
The entire plot raises the obvious question: “Why”? For six years, the state has tried to regulate the industry, which would undermine its basic model and eliminate jobs. They signal to others that if you come up with a good idea, the country will spend years trying to crush you. Maybe the California Supreme Court will eventually bail you out, but who has the time, money, and blood pressure medication to bother you?
This column first appeared in the Orange County Register.
