In the November 3, 2020 election, voters passed the much-debated California Proposition 22. In 2019, the California legislature passed Assembly Bill (AB) 5 which is a state statute that expanded the landmark California Supreme Court case Dynamex Operations West, Inc. vs. Superior Court. In this case, the court ruled that most workers in California are presumed to be, and should be classified as employees, and not independent contractors. For purposes of determining if a worker is an employee or independent contractor, AB5 requires the use of the ABC test, which requires employers to meet all three of the following factors in order to classify a worker as an independent contractor:
- The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact
- The worker performs work that is outside the usual course of the hiring entity’s business; and
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
The passage of AB5 required many employers to reclassify workers previously classified as independent contractors to employees. This especially impacted the “on-demand” or gig economy industry companies such as Uber, Lyft and Instacart. Many of these companies did not immediately comply with AB5, but instead sought to stop enforcement of the law first through the court system, and subsequently through the recently passed ballot measure California Proposition 22.
Regarded as the most expensive proposition ever on a California ballot, Proposition 22 passed by 58% in the recent November 3, 2020 election.
What Does Proposition 22 Do?
Proposition 22 goes into effect in mid-December 2020. The law will require that:
- Companies provide workers an hourly wage for the time the worker spends on rides equal to 120% of either the local or statewide minimum wage.
- Workers driving at least 15-hours per week receive a stipend for health insurance coverage, and a larger stipend for workers driving 25 or more hours per week.
- Drivers have the opportunity to receive occupational accident insurance to cover on-the-job injuries, which would include coverage for medical expenses and disability benefits.
Had Proposition 22 not passed, California gig-economy workers would have been classified as employees under Assembly Bill 5. Whether court claims and actions will continue now that Proposition 22 has passed, remains to be seen.
Tips for Determining if Employees Are Exempt or Non-Exempt Under California Law
The following are tips for other, non gig-economy employers who may need to undergo the process of determining if their workers are exempt or non-exempt under California’s AB5 legislation and related case law.
- Conduct a review of each employee in your workplace to determine if, based on their duties and other factors, whether they are an employee or an independent contractor.
- If it is determined that the person is an employee, determine if the employee is exempt or non-exempt.
- Generally speaking, exempt employees operate with a high level of discretion and judgment and supervise other employees. Exempt employees are not eligible for overtime pay. In a state like California, employers are required to pay exempt employees at least twice the state minimum wage.
- Generally speaking, non-exempt employees are administrative and nature and operate at the direction of a manager or supervisor. Non-exempt employees are eligible to receive overtime pay.
- If an employee is determined to be non-exempt, the employer must pay the employee for all overtime hours and ensure the employee receives all federal and state required meal and rest breaks. For example, in California, non-exempt employees should receive a 10-minute rest break for every four hours worked and a 30-minute meal break after 5 hours of work.
- For all employees, whether exempt or non-exempt, employers should ensure they are observing all federal and state equal employment opportunity, anti-discrimination, and harassment laws. Employers should also ensure they are carrying the necessary insurances, such as workers compensation insurance, and providing any required medical or other benefits. For example, in California, employers are required to provide both part and full-time employees with up to 3 paid sick days per year.
Experienced Employment Law Attorney, Mediator, Arbitrator, Investigator, Legal and Media Commentator
Angela Reddock-Wright is an employment and labor law attorney, mediator, arbitrator, and certified workplace and Title IX investigator (AWI-CH) in Los Angeles, CA. Known as the “Workplace Guru,” Angela is an influencer and leading authority on employment, workplace/HR, Title IX, hazing, and bullying issues.
Angela is a regular legal and media commentator and analyst and has appeared on such media outlets as Entertainment Tonight, Law and Crime with Brian Ross, Court TV, CNN, ABC, CBS, Fox 11 News, KTLA-5, the Black News Channel, Fox Soul – The Black Report, NPR, KPCC, Airtalk-89.3, KJLH Front Page with Dominique DiPrima, the New York Times, the Washington Post, the LA Times, Yahoo! Entertainment, People Magazine, Essence Magazine, the Los Angeles Sentinel, LA Focus, Daily Journal, Our Weekly and the Wave Newspapers.
Angela is a member of the panel of distinguished mediators and arbitrators with Judicate West, a California company that represents the gold standard in dispute resolution. She also owns her own dispute resolution law firm, the Reddock Law Group of Los Angeles, specializing in the mediation, arbitration, and investigation of employment discrimination, harassment, retaliation, and other workplace claims, along with Title IX, sexual assault and misconduct, hazing and bullying cases.
This communication is not legal advice. It is educational only. For legal advice, consult with an experienced employment law attorney in your state or city.