California ride share and delivery drivers will get a raise and some insurance benefits, thanks to a law recently approved by voters. Widely watched in other states, this law could serve as a nationwide model for app-based drivers.
However, the changes ushered in by the passage of California’s Proposition 22, are no panacea. Gig workers are still not paid for some work hours. And the benefits approved by the new law fall far short of benefits provided to employees.
Here’s what Proposition 22 does, doesn’t do, and how it may change the rules for driving or delivering with companies such as Uber, Lyft and Postmates.
What just happened?
Californian voters approved Proposition 22, which resolves the currently disputed employment status of ride share and delivery drivers. Under 22, which goes into effect in January of 2021, drivers are classified as independent contractors. That means they officially work for themselves. (A year-old California law, called AB5, classified them as employees.)
However, Prop. 22 also gives these independent contractors some employee-like benefits. Specifically, they are entitled to a minimum wage for “engaged” hours, some expense reimbursement, disability and accident insurance. If they work more than a set number of hours for any one gig company, that company must provide a health insurance subsidy.
The end result is that some California drivers get a raise and benefits under the new law. But the law has plenty of caveats, including the stipulation that you only get paid for “engaged hours.”
What are “engaged hours?
Generally speaking, that’s the time between the start an engagement and when you complete it. For a Lyft or Uber driver, this would normally be when a driver accepts a rider request and when he or she completes it.
Time drivers spend waiting for an assignment is not compensated.
What’s the new minimum wage?
The new minimum wage is 120% of the minimum wage in the area where you’re working. Minimum wage varies by both state and city. So, where federal minimum wage is just $7.25 per hour, the minimum wage in the state of California is $13 an hour.
In Los Angeles, there’s a higher minimum wage — $15. Minimum wage is even higher in some Northern California cities, such as Mountain View and Sunnyvale.
Thus, the average hourly wage for a California driver will range from $15.60 to $20 when this law goes into effect in January.
What do ride share and delivery drivers earn now?
Between March and November of 2020, ride share drivers earned an average of $18.37 per hour. Delivery drivers earned an average of $16.57 per hour, according to Gridwise, a tool aimed at maximizing driver earnings. Both figures were up sharply from pre-pandemic levels, however.
So does this mean drivers get up to a 20% raise?
Unfortunately, it’s not that simple. The way this wage guarantee works is you earn whatever a ride is worth at the time. But, before the company pays you (generally once each two weeks), the company compares your hourly earnings to the guarantee. If your average wage during that two-week period is less than the guarantee, you get an even-up payment. Those earning more than the minimum guarantee are paid as usual.
This effectively diminishes the value of “surge” pricing for drivers. That’s because higher pay brings up average wages for that earnings period. Thus any low-wage work you earn during that same pay period is subsidized by your own surge earnings rather than the wage guarantee.
What expenses get reimbursed?
Mileage. Drivers will get mileage reimbursed at a rate of 30 cents per “engaged” mile. Like “engaged time,” this generally applies to miles driven when you’ve got a passenger or groceries in the car.
Tolls, cleaning fees, and airport fees are passed on to the driver, as usual.
What about health benefits?
Those who work more than 25 hours per week for any single online platform are entitled to a health care subsidy under the new law. This subsidy is equivalent to 100% of the average company contribution for a “bronze” plan in the Covered California health insurance program. (That’s not 100% of the cost, but 100% of the average contribution. That’s currently about 80% of the cost.) Covered California has not yet announced the average premium. However, the average health insurance premium for a single person in 2020 is $622 per month, according to Kaiser Health Foundation.
If you work between 15 and 25 hours per week for a single company, you get 50% of the average subsidy payment. Theoretically, if you work 15 hours a week for three different companies, you could qualify for three separate subsidy payments.
What’s the catch?
First, qualifying hours are based on a calendar quarter. So you must work the requisite number of hours for three months to qualify for the subsidy. If you quit before the three month period was up — or if your hours failed to hit required 15+ at any time during that period — you don’t qualify.
What about disability and workers compensation insurance?
Online driving and delivery platforms will also be required to provide occupational accident insurance. These policies cover medical expenses and lost income resulting from injuries suffered while the app-based driver is online and able to accept assignments from any of these platforms.
At minimum, these policies must provide up to $1 million in medical expense coverage, plus disability payments equal to 66% of the driver’s average weekly earnings from all platforms during the previous 28 days.
Who does this law affect?
When the new law goes into effect in January, it will impact everyone who drives and delivers for an online platform. This includes California ride share drivers with Uber, Lyft, Kango, HopSkipDrive, Zum, and Wingz.
It also covers delivery drivers with Postmates, Uber Eats, GrubHub, DoorDash, Orange Crate, Amazon Flex, Roadie, and many others.
Grocery shopping and delivery services Shipt and Instacart are affected. However, Dumpling, which licenses the use of its shopping platform for a flat monthly fee, is not.
Does the law require any other major changes?
One significant one is that it gives drivers the right to 100% of their tips. In the past companies like DoorDash were able to use worker tips to pay a portion of the driver’s delivery fee. That will no longer be allowed in California.
Under Prop. 22, 100% of the tips must be passed on to the driver and tips cannot be used to calculate the driver’s average hourly wage for the purposes of the wage guarantee.
Apps also may not penalize drivers for acting like independent contractors. That means they can work for competitors, turn down rides, and limit the times that they are available.
How does this affect drivers in other states?
At the moment it doesn’t. However, legislators in many states have been looking to California to set the tone for gig legislation. Both Massachusetts and Illinois, for example, have been weighing new worker laws to address the app-based workforce. This law may provide some framework for that.
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