California's Prop 22 passed. Now what?

What does Prop 22’s success mean for the independent contractor community in a broader sense?

Prop 22 is a step in the right direction in that it sets some boundaries that protect those who need basic protection, but there’s still a lot we don’t know about it.(Photo: Shutterstock)

After a $200 million-plus investment, an aggressive commercial campaign and extensive lobbying, the trailblazing, Prop 22 decisively passed with a 58% majority vote in California. Once this proposition goes into effect, here’s what we know will happen so far, according to the LA Times:

The passage of Prop 22 essentially means gig workers will still be considered independent contractors in the state. It also exempts gig companies like Uber, Lyft and DoorDash from AB-5, the gig worker bill that was enacted in January of 2020.

Related: What Prop 22 means for the American gig economy’s future

It also means we can expect these gig companies to seek similar legislation in other states. But what does Prop 22’s success mean for the independent contractor community in a broader sense?

The beginning of an evolving conversation

On one hand, Prop 22 has given the corporations mentioned above the ability to continue shoring up their businesses by relying on low-income independent contractors as drivers and delivery personnel.

It also provides gigsters and independent contractors with insurance stipends, hourly wages and some other basic safety nets.

“It effectively creates a third category of worker,” says Steve King, partner in Emergent Research, which studies the independent workforce.

On the other hand, it’s unclear whether Prop 22 will actually do much to help the workers it claims to protect.

“It’s a step towards much-needed oversight, but doesn’t solve for most of the underlying issues independent workers face in the marketplace,” writes Colton Cox of Contently.

Freelancers will still need to push for additional protections

While it provides some semblance of a safety net for gig workers that wasn’t there before, Prop 22’s passage ushers in a new era in which app-based gig companies could potentially circumvent California’s minimum wage guarantee, paid sick leave, and other types of protections.

“The companies had presented the slate of benefits in Proposition 22 as a concession, a weaker version of typical employment benefits,” write Suhauna Hussain and Johana Bhuiyan of the LA Times.

There’s no denying this landmark piece of legislation could have far-reaching impacts on gig workers all over the world. And when we take a look at the actual numbers, it’s clear the stakes are higher than many people realize.

There are about 60 million independent contractors and freelancers involved in the freelancing and gig economy in the United States, and probably three to four times that amount around the world. This number is the fastest-growing segment of the workforce, and the so-called gig economy now equals about 8% of GDP — not something to be taken lightly.

What’s more, it’s critical to remember that this workforce isn’t homogeneous, but is comprised of two vastly different segments — low-skilled workers and highly skilled workers.

Low-skilled workers are those in what many would consider “blue-collar” professions, like truck drivers, delivery people, and rideshare workers. They usually make a low hourly income, are tied to a specific city or area where they live to land their next job. They work hard to make ends meet and do not have any social safety net whatsoever.

Highly skilled workers include professionals like lawyers, software developers, content writers, graphic designers and more. They typically have a significantly higher income — up to hundreds of dollars an hour — and can easily serve any business anywhere in the world. They were (and are) well-positioned and well-equipped to survive and even thrive in conditions like the COVID-19 pandemic, points out Brent Messenger of Fast Company.

It’s the first group of workers — the lower-skilled workers — that needs legislation that enables them to weather crises like the COVID-19 pandemic without having to choose between their personal safety and paying their bills. But now that Prop 22 has passed, this could prove more difficult than before, especially given that it will take a seven-eighths majority to alter it.

Trailblazing though Prop 22 may be, there’s an equal amount of controversy for where Prop 22 falls short (or fails to address critical issues completely) when it comes to providing things like living wages, fair protections and more for gig workers.

What I’m not arguing for is solutions like AB-5 which, as we’ve already seen, are more likely to prevent workers from getting gigs. When all was said and done, AB-5 had to be modified repeatedly after being implemented in January 2020 because instead of providing protection, it was actually putting many types of freelancers out of work.

“AB-5 swept many other types of freelancers into its net, making some employers decide not to hire freelancers from the state and prompting a heated outcry from freelancers in fields that did not get carve-outs that exempted them,” writes Elaine Pofeldt of CNBC.

AB-5 now offers exemptions for more than 100 industries, and has been essentially gutted of any remaining power by Prop 22. It’s worth mentioning that Biden’s proposed PRO Act could similarly place steep restrictions on who could be a freelancer at a national level, ultimately harming millions of workers, or simply leading to more Prop 22 copycat legislation.

What we do need is to focus on creating legislation that allows lower-paid gig workers to maintain the flexibility afforded to them by gig work — but that also provides basic protections. This includes protections that fight for fair, on-time payments, combat discrimination, and open the door to benefits similar to those enjoyed by full-time workers, like paid sick leave, disability insurance, unemployment insurance, and access to affordable healthcare options. The likelihood that Prop 22 will deliver these things is higher than AB-5, but still considerably low.

Why not start considering that “third category” of workers Steve King mentioned — one where gig workers can still be their own bosses and dictate their own hours — but that offers protections comparable to full-time traditional workers? Why not try to craft strategies centered on principles like the triple bottom line approach employed by successful companies like Starbucks, Lego and others?

We need to modernize our regulations

Prop 22 is a step in the right direction in that it sets some boundaries that protect those who need basic protection, but there’s still a lot we don’t know about it, including whether or not it will be the type of safety net gig workers actually need.

To truly know, it’ll need to be examined over the next twelve to twenty-four months and then evaluated again.

Additionally, there’s the likelihood that it will create a competitive advantage for giant corporations over sole proprietors and smaller, family-owned businesses, which could hurt local economies.

And then there’s the uncomfortable issue regarding how much we’re allowing corporations to shape the future of freelance in the U.S. Remember, not every segment of gig workers can have its employers spend $204 million on a ballot to fix things for them — nor should they.

Basic protections like those offered by Prop 22 (and more) need to become the standard practice for freelancers — not simply a stop-gap measure evoked because the bottom lines of large corporations are suddenly threatened by legislation like AB-5.

However, if the U.S. continues to focus on solutions and legislation aimed at broad-strokes, over-generalized fixes that aren’t in the best interest of the companies or independent contractors, organizations will simply do what they did with manufacturing work a few decades ago. They will find contractors overseas where it’s easier, cheaper and less regulated.

And as more freelancers join the gig economy, legislators are now contending with a voting group they simply can’t afford to ignore or alienate. I don’t think any president wants to put 8% of his country’s GDP at risk — much less in the worst economy in a century.

We need governments, companies and workers to rethink employment models, benefits and protections in light of these shifts and modernize our laws and regulations to match a future that, in many ways, is already here.

Shahar Erez is CEO and Co-Founder of Stoke Talent, and an experienced executive with solid engineering, product and marketing leadership backgrounds backed up by sound results. He has more than 15 years of experience in various management positions in a wide range of organizations building stellar teams and leading them to new levels of success in highly competitive markets.

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