University of the Paci;c Law Review University of the Paci;c Law Review
Volume 54
Issue 1
Symposium — Gig Economy
Article 13
1-1-2023
A Wolf in Sheep’s Clothing: Prop 22 and the Exploitation of A Wolf in Sheep’s Clothing: Prop 22 and the Exploitation of
Californian Workers Californian Workers
Erica Oconnell
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Recommended Citation Recommended Citation
Erica Oconnell,
A Wolf in Sheep’s Clothing: Prop 22 and the Exploitation of Californian Workers
, 54 U. PAC.
L. REV. 82 (2023).
Available at: https://scholarlycommons.paci;c.edu/uoplawreview/vol54/iss1/13
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Comments
82
A Wolf in Sheep’s Clothing: Prop 22 and the Exploitation of
Californian Workers
Erica OConnell*
It seems to me to be equally plain that no business which depends for
existence on paying less than living wages to its workers has any right to
continue in this country.” - Franklin Delano Roosevelt
* * *
TABLE OF CONTENTS
I. INTRODUCTION .................................................................................................. 83
II. WORKING 9-TO-5: LAWS GOVERNING HUSTLIN’ TIME................................... 86
A. Labor Law in the Golden State ............................................................. 86
1. Employee or Independent Contractor, it’s a Big Deal .................. 87
2. Dynamex and AB 5: Adding Another Piece to the Employee or
Contractor Puzzle......................................................................... 88
B. The App-Based Gig Economy ............................................................... 90
C. Employment Contracts that Shock the Conscience .............................. 91
III. PROPOSITION 22 ............................................................................................. 92
A. Events Leading Up to Prop 22 .............................................................. 92
B. Prop 22’s Funding and Creation .......................................................... 94
C. Prop 22’s Big Promise ......................................................................... 94
IV. PROP 22 IS AN EMBODIMENT OF CORPORATE GREED AND BAD FAITH
ACTIONS .................................................................................................... 96
A. Prop 22 Harms California Workers ..................................................... 97
1. Prop 22, a Classic Bait-and-Switch ............................................... 97
2. Ramifications for App-Based Drivers ............................................ 99
B. Prop 22 Secures an Unconscionable Contract .................................... 101
1. An Employment Contract That’s Surprisingly Oppressive .......... 101
2. An Employment Contract So Unfair, It’s Shocking ..................... 103
C. Gig-Economy Workers Are Employees, Not Independent
Contractors ....................................................................................... 104
* J.D. Candidate, University of the Pacific, McGeorge School of Law, to be conferred May 2023; B.A.,
Psychology, University of Maryland, College Park, 2019. I would like to thank the editorial staff, the Board of
Editors, and Professor Mootz for their hard work in assisting me with this Comment. I dedicate this Comment to
C.M.R. who has provided an endless source of inspiration and distraction.
The University of the Pacific Law Review / Vol. 54
83
V. PAY NO ATTENTION TO THAT MAN BEHIND THE CURTAIN: UBER AND
LYFT OBSCURING THE TRUTH OF EMPLOYMENT CLASSIFICATION
AND PROFITABILITY ................................................................................ 106
A. Prop 22 Focuses on The Wrong Problem and Creates New Ones ..... 106
1. Employment Costs Are Not the Problem ..................................... 107
2. Prop 22 is an Elaborate Tax-Avoiding Scheme ........................... 108
3. The Frog Boil Begins: Prop 22 Sets a Precedent that
Facilitates the Erosion of Worker Protections........................... 110
B. Uber and Lyft’s Flexibility Argument is as Phony as Their
Financial Success............................................................................. 111
1. A Pro Rata Share of Wages System ............................................. 112
2. Capping Hours Through the App ................................................. 113
VI. CONCLUSION ................................................................................................ 114
I. INTRODUCTION
“I made a mistake,” said Joseph Stevens, an app-based driver from Corona,
California, who voted “yes” on Proposition 22 (Prop 22) in the 2020 California
General Election.
1
Prop 22 was a controversial ballot initiative which classified
app-based drivers as independent contractors instead of employees.
2
Stevens, and
many other Californian gig-economy workers, regret voting to pass Prop 22.
3
To
many gig-economy workers, Prop 22 appeared to benefit workers, as the “Yes on
22” advertisement campaign promoted numerous protections and benefits.
4
In
addition to these promises, “Yes on 22” fostered fear in many gig-economy
workers that without Prop 22, gig-economy work would disappear and existing
legislation would not protect workers.
5
1
. Joseph Stevens, What the Hell Was I Doing Voting Yes on Prop. 22?, PAYUP, https://payup.wtf/prop-
22-mistake (last visited Jan. 8, 2022) (on file with the University of the Pacific Law Review).
2
. See CAL. BUS. & PROF. CODE §§ 7448–7467 (West 2022), invalidated by Castellanos v. State, No.
RG21088725, 2021 WL 3730951 (Cal. Super. 2021) (codifying app-based drivers as independent contractors in
California law).
3
. See Stevens, supra note 1 (acknowledging he was an uninformed voter when the author cast his vote);
Faiz Siddiqui & Natasha Tiku, Uber and Lyft Used Sneaky Tactics to Avoid Making Drivers Employees in
California, Voters Say. Now, They’re Going National, WASH. POST (Nov. 17, 2020),
https://www.washingtonpost.com/technology/2020/11/17/uber-lyft-prop22-misinformation/ (on file with the
University of the Pacific Law Review).
4
. Quincy LeGardye, “Bait and Switch:” Firings Make Some Drivers Regret Yes Vote on Prop 22, L.A.
SENTINEL (Jan. 28, 2021), https://lasentinel.net/bait-and-switch-firings-make-some-drivers-regret-yes-vote-on-
prop-22.html (on file with the University of the Pacific Law Review); see also Andrew Hawkins, Uber and Lyft
Had an Edge in the Prop 22 Fight: Their Apps, VERGE (Nov. 20, 2020),
https://www.theverge.com/2020/11/4/21549760/uber-lyft-prop-22-win-vote-app-message-notifications (on file
with the University of the Pacific Law Review) (reporting that Uber and Lyft’s online platform allowed the
companies to reach a wider audience than opponents to Prop 22).
5
. CAL. BUS. & PROF. CODE § 7449 (West 2022); see Siddiqui & Tiku, supra note 3 (reporting the
2022 / A Wolf in Sheep’s Clothing
84
Prop 22 made alluring promises of higher wages, worker flexibility, healthcare
stipends, and safeguarding low costs for consumers.
6
In reality, none of these
promises came to fruition; the corporate-funded Prop 22 was nothing more than
bait and switch legislation.
7
In the year since the law’s enactment, Californian app-
based drivers earn lower wages, have less flexibility, and rarely qualify for
benefits.
8
Even Prop 22’s promise of lower consumer costs has yet to manifest, as
Uber and Lyft raised service fees.
9
Prop 22 creates an inequitable employment relationship that leaves app-based
drivers without security and vulnerable to poor market conditions.
10
The COVID-
19 pandemic and its devastating economic effects left unemployed gig-economy
workers without unemployment benefits.
11
As the pandemic forced people to
remain in their homes, many drivers lost income opportunities as there were little
ride requests during lockdowns.
12
The lack of available benefits and crisis
protections resulted in sixty-nine percent of app-based drivers being unable to pay
their rent or mortgage in April 2020.
13
To add insult to injury, state tax money
misconceptions voters had regarding Prop 22, such as Prop 22 being the only way for drivers to receive benefits).
6
. See Brian Chen & Laura Padin, Prop 22 Was a Failure for California’s App-Based Workers. Now, It’s
Also Unconstitutional, NAT’L EMP. L. PROJECT (Sept. 16, 2021), https://www.nelp.org/blog/prop-22-
unconstitutional/ (on file with the University of the Pacific Law Review) (reporting that Prop 22 promises to
provide new earning guarantees and benefits while keeping prices low). But see Rachel Sandler, Every Major Gig
Company Has Now Raised Prices in California After Prop. 22, FORBES (Feb. 19, 2021),
https://www.forbes.com/sites/rachelsandler/2021/02/19/every-major-gig-company-has-now-raised-prices-in-
california-after-prop-22/ (on file with the University of the Pacific Law Review) (exposing how many drivers who
are eligible for benefits had not received them months after they qualified).
7
. See Alex Press, No Surprise, Uber and Lyft Lied About Helping Workers, JACOBIN (Aug. 28, 2021),
https://jacobinmag.com/2021/08/gig-companies-economy-california-prop-22-uber-lyft-doordash-drivers-
benefits-wages-health-care (on file with the University of the Pacific Law Review) (reporting that Uber and Lyft
revoked the power to set their own fares and see passenger destinations before accepting rides once Prop 22 came
into effect); LeGardye, supra note 4; Stevens, supra note 1; see also Adam Hayes, Bait and Switch, INVESTOPEDIA
(Sept. 5, 2021), https://www.investopedia.com/terms/b/bait-switch.asp (on file with the University of the Pacific
Law Review) (defining “bait and switch” as a disingenuous advertisement of an attractive offer—the bait—that is
actually inferior in quality, and an upselling of a different product—the switch—for a higher price).
8
. Press, supra note 7; Michael Sainato, ‘I Can’t Keep Doing This:’ Gig Workers Say Pay Has Fallen After
California Prop 22, GUARDIAN (Feb. 18, 2021), https://www.theguardian.com/us-news/2021/feb/18/uber-lyft-
doordash-prop-22-drivers-california (on file with the University of the Pacific Law Review).
9
. See Rachel Sandler, Every Major Gig Company Has Now Raised Prices in California After Prop. 22,
FORBES (Feb. 19, 2021), https://www.forbes.com/sites/rachelsandler/2021/02/19/every-major-gig-company-has-
now-raised-prices-in-california-after-prop-22/ (on file with the University of the Pacific Law Review) (pointing
to the $200 million Uber and Lyft spent in furtherance of Prop 22 and hypothesizing that the likely reason for the
price increase is the companies’ attempt to recuperate that investment).
10
. See Aziz Bah, I’m a New York City Driver. The Pandemic Shows that My Industry Needs Fundamental
Change or Drivers Will Never Recover, INSIDER (July 29, 2020), https://www.businessinsider.com/uber-lyft-
drivers-covid-19-pandemic-virus-economy-right-bargain-2020-7 (on file with the University of the Pacific Law
Review) (expressing distress over the lack of social safety nets for app-drivers who are dependent on their gig-
income).
11
. Id.
12
. See Katie Conger, Uber and Lyft Are Searching for Lifelines, N.Y. TIMES (July 14, 2020),
https://www.nytimes.com/2020/04/17/technology/uber-lift-coronavirus.html (on file with the University of the
Pacific Law Review) (reporting that Uber’s business dropped at least 60% during the initial COVID-19 outbreak).
13
. Bah, supra note 10.
The University of the Pacific Law Review / Vol. 54
85
funded the emergency funding program California created for app-based drivers.
14
Other corporations pay into unemployment systems, while Uber and Lyft
contribute nothing to the app-based driver unemployment program.
15
The
pandemic exposed the harsh realities of Prop 22’s independent contract
employment relationship.
16
On August 20, 2021, the California Superior Court held Prop 22
unconstitutional—thus invalidating it—because it infringes on constitutionally-
granted legislative power to regulate workers’ compensation.
17
Transportation
Network Companies (TNCs)—such as Uber and Lyft—plan to appeal to the higher
courts to overrule this decision and uphold Prop 22’s enforcement.
18
Irrespective
of Prop 22’s unconstitutionality, California should not enforce Prop 22 because it
creates a substantially unfair employment relationship.
19
The California
Legislature should classify app-based drivers as employees to ensure they receive
standard protections and additional protections specific to app-based drivers.
20
Section II describes current law and trends in the California labor market.
21
Section
III details Prop 22’s creation and how it effects California labor law.
22
Section IV
14
. See Faiz Siddiqui & Andrew Van Dam, As Uber Avoided Paying into Unemployment, the Federal
Government Helped Thousands of Its Drivers Weather the Pandemic, WASH. POST (Mar. 16, 2021),
https://www.washingtonpost.com/technology/2021/03/16/uber-lyft-unemployment-benefits/ (on file with the
University of the Pacific Law Review) (exposing how classifying app-based drivers as independent contractors
gives ride-sharing companies an unfair market advantage by passing unemployment insurance expenses to the
public, while other companies have to contribute to unemployment insurance themselves).
15
. Id.
16
. CAL. BUS. & PROF. CODE § 7450 (West 2022); Bah, supra note 10.
17
. Castellanos v. State of California, No. RG21088725, 2021 WL 3730951, 11 (Aug. 20, 2021), appeal
docketed, No. A163655 (Cal. App. Dec. 13, 2021).
18
. See CAL. PUB. UTIL. CODE § 5431(c) (West 2022) (defining transportation network company as a
business entity that provides prearranged transportation services using an online application that connects
customers to drivers with personal vehicles); see also id. (West 2022) (restricting the applicability of Prop 22 to
TNCs, which Uber and Lyft are); Jackie Davalos, Californian Customers Face Higher Rideshare Bill on Prop 22
Reversal, MERCURY NEWS (Aug. 24, 2021), https://www.mercurynews.com/2021/08/24/californians-face-
higher-rideshare-bill-on-prop-22-reversal/ (on file with the University of the Pacific Law Review) (predicting an
increase in fare prices as uncertainty of TNCs rises after the Alameda Superior Court held Prop 22 as
unconstitutional).
19
. See Chen & Padin, supra note 6 (reporting that Prop 22 will remain in effect as Castellanos makes its
way through the appeal process); see infra Section V.B.
20
. Idrian Mollaneda, The Aftermath of California’s Proposition 22, CAL. L. REV. ONLINE BLOG (May
2021), https://www.californialawreview.org/the-aftermath-of-californias-proposition-22 (on file with the
University of the Pacific Law Review); see also Press, supra note 7 (demonstrating that TNCs will not act in
drivers’ best interests, as the corporation is loyal only to their bottom-line, which shows app-based drivers are in
desperate need of employee protections).
21
. Infra Part II.
22
. Infra Part III.
2022 / A Wolf in Sheep’s Clothing
86
explains how Prop 22 harms California workers.
23
Section V argues that Prop 22’s
proponents are disingenuous about employment classification and how it affects
TNCs’ profitability.
24
Section VI concludes this Comment.
25
II. WORKING 9-TO-5: LAWS GOVERNING HUSTLIN’ TIME
26
Prop 22 is a novel piece of legislation that essentially created a new
employment classification: the gig-economy independent contractor.
27
Prior to
Prop 22, California passed legislation that classified app-based drivers as
employees, which obligated TNCs to cease classifying their drivers as independent
contractors.
28
Section A provides basic information on California labor law,
including the state’s methods for classifying workers.
29
Section B explains how the
gig economy functions.
30
Section C explores unconscionable employment
contracts.
31
A. Labor Law in the Golden State
California has long struggled to find an appropriate definition for
“employee.”
32
Nevertheless, there is a consensus that employees have significantly
less control over their work than independent contractors.
33
Independent contractor
23
. Infra Part IV.
24
. Infra Part V.
25
. Infra Part VI.
26
. DOLLY PARTON, 9 TO 5 (RCA Studios 1980) (“Working 9 to 5. . . Cause it’s hustlin’ time. . .”).
27
. See Sandler, supra note 9 (citing Uber CEO, Dara Khosrowshahi, who called Prop 22 the “third-way”
to classify drivers); see also Stevens, supra note 1 (“Yes, it says we’re independent contractors, but it doesn’t
“protect” independent contractor status—it creates a totally new definition.”).
28
. See Sam Harnett, Prop 22 Explained: Why Gig Companies Are Spending Huge Money on an
Unprecedented Measure, KQED (Oct. 26, 2020), https://www.kqed.org/news/11843123/prop-22-explained-
why-gig-companies-are-spending-huge-money-on-an-unprecedented-measure (on file with the University of the
Pacific Law Review) (detailing the expenses gig companies are responsible for if the legislature classifies drivers
as employees).
29
. Infra Section II.A.
30
. Infra Section II.B.
31
. Infra Section II.C.
32
. Peter Tran, Comment, The Misclassification of Employees and California’s Latest Confusion
Regarding Who is an Employee or an Independent Contractor, 56 SANTA CLARA L. REV. 677, 678, 681–87
(2016).
33
. Id.; see also Martinez v. Combs, 49 Cal. 4th 35, 59 (2010) (detailing three definitions of employ: “(a)
to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage,
thereby creating a common law employment relationship”); see also Borello & Sons Inc. v. Dep’t Indus. Rel., 48
Cal. 3d 341, 350 (1989) (stating the “right of control” test combined with eight other factors determines an
employment relationship). Compare CAL. LAB. CODE § 3351 (West 2022) (defining “employee” as an individual
“in the service of an employer under any appointment. . .”), with CAL. LAB. CODE § 3353 (West 2022)
(“‘Independent contractor’ means any person who renders service for a specified recompense for a specified
result, under the control of his principal as to the result of his work only and not as to the means by which such
result is accomplished”), and 29 U.S.C. § 203 (2022) (“[T]he term ‘employee’ means any individual employed
by an employer.”)
The University of the Pacific Law Review / Vol. 54
87
employment relationships provide some benefits; however, the classification is not
appropriate for all workers as the law affords different rights and protections based
on their classification.
34
Subsection 1 details the different regulations on
employees and independent contractors.
35
Subsection 2 outlines how California
decides the appropriate classification for workers.
36
1. Employee or Independent Contractor, it’s a Big Deal
When the law classifies a worker as an employee, it saddles the employer with
numerous responsibilities toward their employees.
37
These responsibilities include
paying Federal Insurance Contribution Taxes (FICA), Federal Unemployment
Taxes (FUTA), and state unemployment insurance and payroll taxes on behalf of
their employees.
38
Additionally, the employer must comply with state and federal
statutes that regulate employee wages, hours, working conditions, and safety
standards.
39
The legislature designed these regulations to protect employees from
dangerous and exploitative business practices.
40
When a business classifies a worker as an independent contractor, the hiring
entity is free from many regulations and protections the law guarantees to
employees.
41
A business that hires an independent contractor does not have to pay
federal and state payroll taxes nor provide unemployment and workers’
compensation insurance.
42
Additionally, state and federal regulations regarding
34
. See Wood LLP, Independent Contractors, XPERTHR EMP. L. MANUAL § 266 (2015) (detailing how a
contractor benefits in running their own business in providing services to third parties); Tran, supra note 32, at
678; Roxanne Wilson & Jeffrey Weston, Hiring ABCs, 44 L.A. LAW. 14, 14 (2021).
35
. Infra Subsection II.A.1.
36
. Infra Subsection II.A.2.
37
. Wilson & Wetson, supra note 34, at 14.
38
. See 26 U.S.C. § 3301 (2022) (declaring the FUTA payroll tax rate as 6% of the employee’s wages);
see also Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, 913 (2018); 26 U.S.C. § 3111 (2022)
(declaring the FICA payroll tax rate as 6.2% of the employee’s wages for Social Security, and 1.42% for
Medicare); see also Retirement Benefits, SOC. SEC. ADMIN., https://www.ssa.gov/benefits/
retirement/learn.html#h1 (last visited Dec. 21, 2021) (on file with the University of the Pacific Law Review)
(defining Social Security Benefits as government-provided post-retirement, disability, and survivor income based
on lifetime earnings and taxes paid on said earnings). See Fact Sheet: Unemployment Insurance Program, CAL.
EMP. DEV. DEP’T, https://www.edd.ca.gov/pdf_pub_ctr/de8714b.pdf (last visited Dec. 21, 2021) (on file with the
University of the Pacific Law Review) (“The Unemployment Insurance Program, commonly referred to as UI,
provides weekly unemployment insurance payments for workers who lose their job through no fault of their
own”); see also 2021 Federal and State Payroll Taxes, CAL. EMP. DEV. DEP’T (2021),
https://www.edd.ca.gov/pdf_pub_ctr/de202.pdf (on file with the University of the Pacific Law Review) (showing
California’s employer payroll tax rate as 3.4% for unemployment and 0.1% for employee training).
39
. See CAL. LAB. CODE § 1182.12 (West 2022) (dictating the 2022 minimum wage in California as $15
an hour for employers employing 26 or more employees and $14 an hour for employers with 25 or fewer
employees); see also CAL. LAB. CODE § 510 (West 2022) (requiring overtime payment of one and a half of an
employee’s regular pay for hours worked in excess of eight hours per day and 40 hours per week); Dynamex
Operations W. v. Superior Court, 4 Cal. 5th 903, 913 (2018).
40
. Tran, supra note 32, at 678.
41
. Wilson & Wetson, supra note 34, at 14.
42
. Tran, supra note 32, at 678.
2022 / A Wolf in Sheep’s Clothing
88
employee wage, hours, and working conditions do not apply to independent
contractors.
43
The business passes these responsibilities to the independent
contractor, giving businesses a strong economic incentive to misclassify
employees as independent contractors.
44
This employment relationship is
beneficial for traditional independent contractors—such as plumbers or
accountants—as the contractor runs their own business.
45
The independent
contractor status becomes problematic when businesses apply the status to workers
who do not run their own business, and rely solely on the company for earnings.
46
2. Dynamex and AB 5: Adding Another Piece to the Employee or Contractor
Puzzle
In 2004, the delivery company Dynamex reclassified their delivery drivers as
independent contractors rather than employees.
47
Dynamex reclassified their
drivers to lower their expenses and operating costs.
48
In response, delivery drivers
filed suit against Dynamex, claiming the company misclassified the drivers’
employment status, thereby engaging in unfair and unlawful business practices.
49
The resolution required the California Supreme Court to determine the correct test
to distinguish an employee from an independent contractor.
50
Prior to Dynamex, the Borello test was the standard test the courts
implemented to determine whether a worker is an employee or a contractor.
51
The
Borello test considers multiple factors including the right-to-control, whether the
work requires a special skill, and whether the work is integral to the employer’s
business.
52
Instead of the Borello test, the Court held the ABC test as the correct
test to determine whether a worker is an employee or a contractor.
53
At the time of
the decision, multiple states already employed the ABC test.
54
This test finds a
worker is an independent contractor when the hiring entity can satisfy all of the
43
. Id.
44
. Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, 913 (2018).
45
. Corey Husak, How U.S. Companies Harm Workers by Making Them Independent Contractors, WASH.
CTR. EQUITABLE GROWTH (July 31, 2019), https://equitablegrowth.org/how-u-s-companies-harm-workers-by-
making-them-independent-contractors/ (on file with the University of the Pacific Law Review).
46
. Julia Weaver, Note, Two Sides of the Same Coin: Examining the Misclassification of Workers as
Independent Contractors, 55 GA. L. REV. 1355, 1367 (2021).
47
. Dynamex, 4 Cal. 5th at 916.
48
. Id.
49
. Id.
50
. Id.
51
. Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, 929 (2018); see Borello & Sons Inc. v.
Dep’t Indus. Rel., 48 Cal. 3d 341, 350 (1989) (creating a new test for employee classification, which Dynamex
invalidated).
52
. See Borello, 48 Cal. 3d at 350 (defining right to control as the worker’s ability to perform their work
without the hiring entity’s direction or control).
53
. Dynamex, 4 Cal. 5th at 956.
54
. Id. at 955.
The University of the Pacific Law Review / Vol. 54
89
test’s three prongs.
55
Part A requires that a hirer does not control, nor direct how a
worker performs the work.
56
Part B requires that the worker does not work in the
hiring entity’s business, meaning the work is not necessary to the core business
model.
57
Finally, part C requires that the worker routinely works in an independent
trade, occupation, or business of the same nature of work they performed for the
hiring entity.
58
Shortly after the Dynamex decision, Governor Newsom signed AB 5 into
law.
59
AB 5 codified the ABC test and extended its scope into the Labor Code and
Unemployment Insurance Code.
60
A few months after AB 5’s enactment,
Governor Newsom signed AB 2257, revising and clarifying AB 5’s exemptions.
61
These exemptions include specific categories of occupations and contractual
relationships exempt from the ABC test.
62
When an occupation falls under one of
these exemptions, the Borello test determines the worker’s classification.
63
Though an independent contractor status is beneficial to some occupations, an
independent contractor status can prove harmful to workers in other occupations.
64
A true independent contractor has bargaining power because their work is separate
from the hiring entity’s industry.
65
Thus, a true independent contractor can solicit
their services from various companies or individual parties, which provides
meaningful choice in the market.
66
55
. Id. at 957.
56
. See id. at 929 (holding that part A is similar to the common law right-to-control test for employment).
57
. See id. (holding that part B focuses on whether the individual is working in the hiring company’s
business); see also Great N. Constr., Inc. v. Dep’t Lab., 204 Vt. 1, 13–14 (2016) (finding that a construction
worker who specialized in historical restoration did not perform work necessary to the construction company’s
core business model of general construction).
58
. See Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, 960 (2018) (holding that part C asks
whether the individual made the independent decision to go into the business for themselves); see also Garcia v.
Border Transp. Grp., LLC, 28 Cal. App. 5th 558, 575–76 (2018) (finding that a taxi driver did not establish
himself as a separate business from the taxi company because he relied on the business to facilitate performing
the work).
59
. CAL. LAB. CODE §§ 2750.3, 3351 (enacted and amended by 2019 Stat. Ch. 296, respectively); CAL.
UNEMP. INS. CODE § 606.5 (amended by 2019 Stat. Ch. 296); Wilson & Wetson, supra note 34, at 14.
60
. CAL. LAB. CODE §§ 2750.3, 3351 (enacted and amended by 2019 Stat. Ch. 296, respectively); CAL.
UNEMP. INS. CODE § 606.5 (amended by 2019 Stat. Ch. 296); Wilson & Wetson, supra note 34, at 14.
61
. Wilson & Wetson, supra note 34, at 14; CAL. LAB. CODE §§ 2775–2787 (enacted by 2020 Stat. Ch.
38).
62
. CAL. LAB. CODE §§ 2775–2787 (enacted by 2020 Stat. Ch. 38).
63
. See CAL. LAB. CODE §§ 2776–2782 (West 2022) (providing exemptions for bona fide business-to-
business relationship, referral agencies, professional services, sole proprietors, music and performing arts,
construction subcontractor, and data aggregators); see also CAL. LAB. CODE § 2783 (West 2022) (providing
employee exceptions for Borello occupations, which include but are not limited to insurance, physicians, lawyers,
and investment advisors).
64
. Husak, supra note 45.
65
. See id. (citing plumbers, wedding photographers, consultants, and lawyers as examples of independent
contractors).
66
. See id. (explaining properly classified independent contractors have a service that a separate company
needs, giving bargaining power and ample potential clients, giving them a meaningful choice); contra Tanya
Goldman & David Weil, Who’s Responsible Here? Establishing Legal Responsibility in the Fissured Workplace,
2022 / A Wolf in Sheep’s Clothing
90
An independent contractor status is harmful to workers who have little
bargaining power and are under company control.
67
It is harmful because the
worker has no protection or control over their working arrangement.
68
The
company, with superior bargaining power, can dictate the terms almost
unilaterally; leaving the worker the choice to either agree to the terms or look for
work elsewhere.
69
The ABC test aims to identify workers who lack bargaining
power and properly classify them as employees to protect them from exploitative
misclassification.
70
B. The App-Based Gig Economy
Gig work is not a new concept; it had existed long before application
companies began offering alternative avenues to earn income.
71
Traditional gig
work is temporary, unreliable, and casual, where the skilled artisan can flit from
job to job in exchange for money.
72
Modern companies adapted this construct into
the “gig economy,” where network companies host an online marketplace through
mobile applications (apps).
73
App users sign up to either perform a singular service
for payment or receive services for a fee.
74
The network company retains a
percentage of that fee to generate profit and cover the expenses of hosting the app.
75
However, unlike the traditional gig worker, the gig economy requires the
worker to obtain customers solely through their services.
76
This system creates a
highly unequal bargaining relationship between the company and workers.
77
The
42 BERKELEY J. EMP. & LAB. L. 55, 60–61 (2021) (detailing how modern erosions of worker rights have affected
independent contractor’s bargaining power).
67
. Husak, supra note 45.
68
. Weaver, supra note 46, at 1367.
69
. Id. at 1372–73.
70
. Lynn Rhinehart et al., Misclassification, the ABC Test and Employee Status, ECON. POL’Y INST. (June
16, 2021), https://www.epi.org/publication/misclassification-the-abc-test-and-employee-status-the-california-
experience-and-its-relevance-to-current-policy-debates (on file with the University of the Pacific Law Review).
71
. See ALEX DE RUYTER & MARTYN BROWN, THE GIG ECONOMY 3–4 (2019) (detailing how through the
18th to the 20th century, the term “gig” more closely matched “freelancer,” and gig work was commonly referred
to jazz musician’s paid performances by the 20th century); see also id. at 3 (detailing how through the 18th to the
20th century, the term “gig” more closely matched “freelancer,” and by the 20th century, gig work commonly
referred to jazz musician’s paid performances); see generally Gig, MERRIAM-WEBSTER (2021),
https://www.merriam-webster.com/dictionary/gig (on file with the University of the Pacific Law Review) (“[A]
job, usually for a specified time; especially: an entertainer’s engagement.”); see also Freelancer, MERRIAM-
WEBSTER DICTIONARY (2021), https://www.merriam-webster.com/dictionary/freelancer (on file with the
University of the Pacific Law Review) (“[A] person who pursues a profession without a long-term commitment
to any one employer.”).
72
. ALEX DE RUYTER & MARTYN BROWN, THE GIG ECONOMY 4–5 (2019).
73
. Jed Marcus, Types of Workers, XPERTHR EMP. L. MANUAL § 32041 (2015).
74
. Id.
75
. ALEX DE RUYTER & MARTYN BROWN, THE GIG ECONOMY 34 (2019).
76
. Id.
77
. See LAWRENCE MISHEL & CELINE MCNICHOLAS, ECON. POL’Y INST., UBER DRIVERS ARE NOT
ENTREPRENEURS 9 (2019) (showing that Uber does not allow drivers to alter their driving strategies or allow
The University of the Pacific Law Review / Vol. 54
91
company dictates what the worker charges for their services while providing little
to no opportunity to negotiate contract terms with the company.
78
Essentially, the
network company negotiates on behalf of the worker, whereas the traditional gig
worker negotiates their own terms to provide their services.
79
C. Employment Contracts that Shock the Conscience
Contract law—along with many other law sources—govern employment
relationships.
80
When an employer hires an employee, the parties create an
employment contract.
81
Many common law principles of contract law govern
employment contracts, such as the doctrine of unconscionability.
82
Unconscionability generally refers to contracts that unreasonably favor one party,
where the other party has little opportunity to negotiate.
83
Unconscionability has two components: the procedural element and the
substantive element.
84
The procedural element comprises of oppression and
surprise.
85
Oppression arises when one party has significantly more bargaining
power, resulting in no real negotiation and a lack of meaningful choice.
86
Therefore, the contract is “adhesive” in nature.
87
Surprise occurs when the party
with superior bargaining power drafts a contract that hides terms in lengthy
provisions.
88
The substantive element focuses on whether the contract’s terms
reallocate risk to one party unreasonably or unexpectedly, or is so unfair that it
drivers a choice in the types of rides they can accept).
78
. Id. at 9; see also Rachel Sandler, Uber Won’t Let California Drivers Set Their Own Prices Anymore
After Rider Cancellations Increased 117%, FORBES (Apr. 9, 2021),
https://www.forbes.com/sites/rachelsandler/2021/04/08/uber-wont-let-california-drivers-set-their-own-prices-
after-rider-cancellations-increased-117/?sh=b105e2129616 (on file with the University of the Pacific Law
Review) (reporting how Uber changed their policy of having drivers set their prices once the company did not
need to demonstrate how little they control their drivers).
79
. Compare MISHEL & MCNICHOLAS, supra note 77, at 12 (showing Uber controls most aspects of their
drivers’ services), with Ari Herstand, 7 Negotiating Techniques Musicians Need to Get Paid, DIGIT. MUSIC NEWS
(Feb. 4, 2014), https://www.digitalmusicnews.com/2014/02/04/negotiating-techniques/ (on file with the
University of the Pacific Law Review) (showing traditional musician gig work provides multiple avenues for gig
musicians to negotiate the terms of their service contract).
80
. See Contract, BLACK’S LAW DICTIONARY (11th ed. 2019) (defining a contract as an agreement between
two parties).
81
. Preface PR 15, CAL. EMP. DEV. DEP’T (2021), https://www.edd.ca.gov/uibdg/preface_pr_15.htm (on
file with the University of the Pacific Law Review) (explaining an employment contract as an agreement between
an employer and employee or independent contractor); Contract, BLACK’S LAW DICTIONARY (11th ed. 2019).
82
. Ellis v. McKinnon Broad. Co., 18 Cal. App. 4th 1796, 1803 (1993).
83
. Id.
84
. Id.
85
. Id.
86
. Id.
87
. See Serpa v. California Sur. Investigations Inc., 215 Cal. App. 4th 695, 703–04 (2013) (finding
adhesion contracts usually contain some aspects of procedural unconscionability); see also Adhesion Contract,
BLACK’S LAW DICTIONARY (11th ed. 2019) (defining “adhesion contract” as a standard-form contract, which the
party with more bargaining power creates, that the weaker party agrees and signs on a “take-it-or-leave-it” basis).
88
. Ellis, 18 Cal. App. 4th at 1803.
2022 / A Wolf in Sheep’s Clothing
92
shocks the conscience.
89
When a court finds a contract unconscionable, the court
may sever the unconscionable clause.
90
If the court cannot sever the clause, the
court can refuse to enforce the entire contract.
91
Alternatively, the court may limit
the application of the contract terms to avoid an unconscionable result.
92
III. PROPOSITION 22
The California Constitution grants the people of California the power to
propose statutes or amendments to the Constitution through the initiative process;
California calls these proposals propositions.
93
If the proposition satisfies basic
state-mandated requirements, the Attorney General adds the proposition to the
ballot, where the people vote to enact the proposition during the general election.
94
In the 2020 general election, California voters enacted Prop 22 into California law
despite much controversy and public outcry.
95
Section A explains the events
leading up to Prop 22’s creation.
96
Section B details how TNCs funded Prop 22.
97
Section C clarifies what Prop 22 guarantees for app-based drivers.
98
A. Events Leading Up to Prop 22
Neither Uber nor Lyft have been profitable throughout both companies’
decade-long time in operation.
99
Even with the companies utilizing the
independent contractor status for their workers, they have been consistently
operating at a multi-billion-dollar loss every year.
100
Despite many promises of
89
. Id.; Serpa, 215 Cal. App. 4th at 703–04 (2013); see Carboni v. Arrospide, 2 Cal. App. 4th 76, 83 (1991)
(finding that a substantial showing of substantial unconscionability will overcome a weak showing of procedural
unconscionability).
90
. CAL. CIV. CODE § 1670.5 (West 2022).
91
. Id.
92
. Id.
93
. CAL. CONST. art. II § 8(a); Statewide Initiative Guide, CAL SEC’Y STATE, at i (revised Mar. 2021),
https://elections.cdn.sos.ca.gov/ballot-measures/pdf/statewide-initiative-guide.pdf (on file with the University of
the Pacific Law Review).
94
. See Statewide Initiative Guide, supra note 93 (explaining the initiative process as requiring private
parties to submit propositions after paying a $2,000 fee, allowing the public to submit critiques, and undergo a
fiscal impact analysis).
95
. Mollaneda, supra note 20; Michael Sainato, ‘A Slap in the Face:’ California Uber and Lyft Drivers
Criticize Pay Cuts Under Prop 22, GUARDIAN (May 16, 2021), https://www.theguardian.com/us-
news/2021/may/16/uber-lyft-drivers-california-prop-22 (on file with the University of the Pacific Law Review).
96
. Infra Section IV.A.
97
. Infra Section IV.B.
98
. Infra Section IV.C.
99
. Therese Poletti, Uber and Lyft Are Staging a Ridiculous Race for Fake Profits, MARKETWATCH (Aug.
6, 2021), https://www.marketwatch.com/story/uber-and-lyft-are-staging-a-ridiculous-race-for-fake-profits-
11628205337 (on file with the University of the Pacific Law Review).
100
. See Mansoor Iqbar, Uber Revenue and User Statistics (2022), BUS. APPS,
https://www.businessofapps.com/data/uber-statistics/ (last updated Feb. 17, 2022) (on file with the University of
Pacific Law Review) (listing Uber’s profit margin over its eight years in business, which shows a $24.5 billion
The University of the Pacific Law Review / Vol. 54
93
achieving profit for numerous financial quarters, Uber and Lyft still have not
turned a profit.
101
This consistent pattern of negative profitability demonstrates
TNCs will likely not see profitability any time soon.
102
Even if Uber became
profitable, it would still need to pay off $11.60 billion in debt to break even.
103
A major barrier to the ridesharing industry generating profits is insurance
costs.
104
Rideshare companies spend about fifty percent of their revenue
maintaining third-party liability insurance.
105
The other fifty percent goes into
other operating costs in maintaining the host app, and compensating the corporate
staff and board members.
106
An employment classification for their drivers
undoubtedly increases the companies’ taxes.
107
An increase in overhead costs in
the TNCs’ over-expended budget caused board members to panic.
108
When AB 5 officially classified app-based drivers as employees, many TNCs
felt this would lead to the end of their companies.
109
They already could not afford
the insurance costs of keeping their business running.
110
Adding additional costs
would accelerate their business’s failure before the market could develop enough
for a profitable system.
111
TNCs needed to find a way to avoid this classification
to avoid bankruptcy.
112
loss in total); see also Mansoor Iqbar, Lyft Revenue and Usage Statistics (2022), BUS. APPS,
https://www.businessofapps.com/data/lyft-statistics/ (last updated Jan. 11, 2022) (on file with the University of
the Pacific Law Review) (listing Lyft’s profit margin over its three years in business, which shows a $5.2 billion
loss in total).
101
. See Jon Porter, Uber Thinks it Could Actually Turn a Profit This Quarter, VERGE (Sept. 22, 2021),
https://www.theverge.com/2021/9/22/22687501/uber-adjusted-profit-q3-2021-pandemic-ride-hailing-food-
delivery (on file with the University of the Pacific Law Review) (reporting that Uber predicts their adjusted profits
for quarter three, 2021 will be up to $25 million); see also Iqbar, supra note 100 (showing a $400 million loss for
Uber in 2021); see Lyft Announces Solid Q4’21 and Fiscal 2021 Results, LYFT (Feb. 8, 2022),
https://investor.lyft.com/news-and-events/news/news-details/2022/Lyft-Announces-Solid-Q421-and-Fiscal-
2021-Results/ (on file with the University of the Pacific Law Review) (reporting a $1 billion loss for Lyft in 2022).
102
. Poletti, supra note 99; Hubert Horan, Will the Growth of Uber Increase Economic Welfare?, 44
TRANSP. L.J. 33, 49 (2017).
103
. Balance Sheet for Uber Technologies, WALL ST. J., https://www.wsj.com/market-
data/quotes/UBER/financials (last visited Apr. 23, 2022) (on file with the University of the Pacific Law Review).
104
. Tina Bellon & Noor Zainab Hussain, Insurance Cost Strategy Key to Lyft’s Path to Profitability, INS.
J. (Oct. 31, 2019), https://www.insurancejournal.com/news/national/2019/10/31/547056.htm (on file with the
University of the Pacific Law Review); Joseph Kowaleski, Insurance: The Primary Barrier to Uber’s Profitability,
SEEKING ALPHA (Sept. 26, 2019), https://seekingalpha.com/article/4293755-insurance-primary-barrier-to-ubers-
profitability (on file with the University of the Pacific Law Review).
105
. Kowaleski, supra note 104.
106
. Alexia Fernandez Campbell, California Just Passed a Landmark Law to Regulate Uber and Lyft,
VOX (Sept. 18, 2019), https://www.vox.com/2019/9/11/20850878/california-passes-ab5-bill-uber-lyft (on file
with the University of the Pacific Law Review).
107
. Id.
108
. Id.
109
. Id.
110
. Bellon & Hussain, supra note 104; Horan, supra note 102, at 49.
111
. Bellon & Hussain, supra note 104.
112
. Harnett, supra note 28.
2022 / A Wolf in Sheep’s Clothing
94
B. Prop 22’s Funding and Creation
Uber, Lyft, DoorDash, and other TNCs funded Prop 22 to circumvent AB 5’s
employee classification standards.
113
If the legislature classifies drivers as
employees, TNCs would incur significant labor costs in providing benefits and
minimum wage to drivers.
114
When TNCs classify their drivers as contractors, the
company saves over $100 million on Unemployment Insurance taxes alone.
115
TNCs save a much greater total amount by not paying minimum wage, health
insurance benefits, and other employee protection costs.
116
Gig-economy companies invested over $200 million into Prop 22’s initiative,
making the proposition the most expensive ballot initiative in California’s
history.
117
Prop 22’s proponents overwhelmed many California voters with endless
political ads on television and social media.
118
The “Yes on 22” campaign
promoted the idea that Prop 22 would grant basic protections to app-based drivers,
and without it, app-based job opportunities would disappear.
119
These
advertisements misled voters to believe Prop 22 was the only way to grant gig-
workers minimum wage.
120
C. Prop 22’s Big Promise
Prop 22 added a new law—known as the App-Based Drivers and Services
Act—to the California Business and Professions Code.
121
This new legislation is
specific to TNCs and app-based drivers and delivery services.
122
The Act posits
that classifying drivers as employees threatens “flexibility” and forces drivers to
113
. Mollaneda, supra note 20.
114
. Id.
115
. Ken Jacobs & Michael Reich, What Would Uber and Lyft Owe to the State Unemployment Insurance
Fund, UC BERKLEY LAB. CTR. (May 7, 2020), https://laborcenter.berkeley.edu/press-release-what-would-uber-
and-lyft-owe-to-the-state-unemployment-insurance-fund/ (on file with the University of the Pacific Law Review)
(reporting only the amount of unemployment insurance gig-companies owes that does not factor in other
expenses).
116
. Compare Harnett, supra note 28 (detailing the expenses gig companies are responsible for, if drivers
are classified as employees), with Jacobs & Reich, supra note 115 (reporting only the amount of unemployment
insurance gig-companies owes that does not factor in other expenses).
117
. Proposition 22, App Based Drivers as Contractors and Labor Policies Initiative (2020),
BALLOTPEDIA, https://ballotpedia.org/California_Proposition_22,_App-Based_Drivers_as_Contractors_and_
Labor_Policies_Initiative_(2020)#cite_note-finance-25 (last visited Oct. 31, 2021) (on file with the University of
the Pacific Law Review); Dawn Geske, Here’s How Much Money Uber and Lyft Will Save From Prop 22, INT’L
BUS. TIMES (Nov. 4, 2020), https://www.ibtimes.com/heres-how-much-money-uber-lyft-will-save-prop-22-
3076284 (on file with the University of the Pacific Law Review).
118
. Siddiqui & Tiku, supra note 3.
119
. Id.
120
. Id.
121
. CAL. BUS. & PROF. CODE §§ 7448–7467 (West 2022).
122
. See CAL. BUS. & PROF. CODE § 7451 (West 2022) (applying the provisions to delivery network
companies (DNCs) as well, but this comment refers to TNCs solely for the sake of simplicity).
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95
relinquish the right to set their own hours.
123
It also states that drivers need the
classification of independent contractors to avoid forcing drivers into set shifts and
mandatory hours.
124
The Act asserts this new legislation is “necessary to protect
[drivers’] freedom to work independently” and provide drivers “new benefits and
protections not available under existing law.”
125
The Act outlines Prop 22’s benefits and protections, ranging from
compensation obligations to anti-discrimination and public safety mandates.
126
The Act prohibits TNCs from: setting drivers’ hours, requiring drivers to accept
specific service requests, or preventing drivers from working for other companies
or app-based services.
127
Prop 22 also details how TNCs must compensate drivers
by mandating a “guaranteed minimum level of compensation” that is equal to
120% of the local minimum wage.
128
However, this guaranteed minimum
compensation only applies to “engaged time spent,” meaning TNCs only include
the minutes the driver fulfills a ride request in the compensation calculation.
129
TNCs do not include the time a driver spends waiting for a request.
130
The Act
mandates TNCs to subsidize drivers’ earnings if their earnings do not meet the
guaranteed minimum.
131
Finally, the Act requires drivers to keep all of their
gratuity tips.
132
In other words, the law prevents TNCs from retaining any portion
of these tips.
133
The Act also provides a health care subsidy and loss and liability protection.
134
The health care subsidy provides a driver a payment equal to the average
Affordable Care Act (ACA) contribution.
135
But, the driver must average twenty-
five hours in engaged driving time a week in the calendar quarter to qualify.
136
For
drivers who averaging fifteen hours in engaged driving time average, the subsidy
123
. CAL. BUS. & PROF. CODE § 7449 (West 2022).
124
. Id.
125
. Id.
126
. CAL. BUS. & PROF. CODE §§ 7448–7462 (West 2022); see CAL. BUS. & PROF. CODE § 7456 (West
2022) (establishing protections from gig-companies terminating or refusing contracts with drivers based on their
race, sex, national origin, and other protected classes); see also CAL. BUS. & PROF. CODE § 7457 (West 2022)
(requiring gig-economy companies to provide a system where drivers and customers can submit complaints of
discrimination or harassment, as well as providing safety training to drivers).
127
. CAL. BUS. & PROF. CODE § 7451 (West 2022).
128
. See CAL. LAB. CODE § 1182.12 (West 2022) (setting the 2022 minimum wage in California as $15 an
hour); see also CAL. BUS. & PROF. CODE § 7453 (West 202) (accompanying Cal. Lab. Code § 1182.12, Prop 22
requires gig-economy companies to guarantee a minimum compensation of $18 an hour).
129
. CAL. BUS. & PROF. CODE § 7453 (West 2022).
130
. Id.
131
. Id.
132
. Id.
133
. Id.
134
. CAL. BUS. & PROF. CODE § 7454 (West 2022).
135
. Id.
136
. CAL. BUS. & PROF. CODE § 7463 (West 2022) (defining “engaged driving time” time the driver spent
engaged in a ride request, which begins when the driver accepts the ride and concludes when the driver drops off
the passenger).
2022 / A Wolf in Sheep’s Clothing
96
payment is fifty percent of the average ACA contribution.
137
TNCs must provide
drivers with a loss and liability policy, similar to workers’ compensation.
138
The
policy covers medical expenses of up to one million dollars.
139
Additionally, the
policy provides for disability payments of up to sixty-six percent of drivers’
weekly income from all network companies and accidental death insurance
benefits for a driver’s dependents.
140
TNCs supply the policy when accidents occur
during the driver’s online time.
141
The company does not provide the policy when
the driver is in the engaged driving time for another company or the driver is
engaging in personal driving while online.
142
IV. PROP 22 IS AN EMBODIMENT OF CORPORATE GREED AND BAD FAITH
ACTIONS
Gig-economy companies invested a lot of money towards creating and
enacting Prop 22, and these companies will continue exerting fervent effort to
maintain Prop 22’s legislative effect.
143
Meanwhile, labor relations special interest
groups and gig-economy worker’s rights organizations are actively working to
repeal Prop 22, creating an expensive and time-consuming litigation standstill.
144
Section A shows how Prop 22 harms California workers.
145
Section B uses the
unconscionability doctrine to demonstrate Prop 22’s inherent inequity.
146
Section
C argues that app-based drivers are employees.
147
137
. CAL. BUS. & PROF. CODE § 7454 (West 2022).
138
. CAL. BUS. & PROF. CODE § 7455 (West 2022).
139
. Id.
140
. Id.
141
. Id.
142
. Id.
143
. See Grace Manthey, Prop 22: Rideshare-Driver Measure Is Most Expensive in California History,
ABC7 (Nov. 3, 2020), https://abc7.com/22-california-prop-2020-ca-what-is/7585005/ (on file with the University
of the Pacific Law Review) (reporting that Prop 22’s proponents invested about $200 million into the proposition’s
campaign).
144
. Chen & Padin, supra note 6.
145
. Infra Section IV.A.
146
. Infra Section IV.B.
147
. Infra Section IV.C.
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97
A. Prop 22 Harms California Workers
Prop 22’s misleading promotional campaign lured many app-based drivers
into supporting and voting to enact it.
148
However, the benefits Prop 22 promised
are negligible and TNCs are not following through on those promises.
149
Subsection 1 explains Prop 22 and TNCs’ misrepresentations.
150
Subsection 2
discusses Prop 22’s ramifications for gig-economy workers.
151
1. Prop 22, a Classic Bait-and-Switch
Like many campaign promises, Prop 22 exaggerated the benefits it would
confer on the public.
152
Prop 22’s promotional campaign and referendum language
promised to protect gig-economy workers’ economic security and gig-economy
work opportunities.
153
Additionally, the Act claims to provide basic protection and
benefits not available under current law.
154
In reality existing law—AB 5—
provided gig-economy workers protection and benefits as employees that far
exceeded what Prop 22 offered gig-economy independent contractors.
155
Prop 22
baited voters into believing Prop 22 was the better deal for workers; when it
actually delivered subpar protections and benefits than advertised.
156
Prop 22’s proponents claimed this Act was necessary to guarantee drivers’
flexibility to set their own hours and work on their own time.
157
However, there is
nothing in the California Labor Code restricting employees’ ability to set their own
hours; there are only limitations to how long an employee can work without a
break.
158
In fact, most of the Labor Code regarding hours places restrictions on
employers, not employees.
159
For example, the Labor Code requires employers to
provide a thirty-minute meal period for every six hours they worked, but an
employee may voluntarily waive this rest period.
160
Additionally, an employee
148
. Press, supra note 7.
149
. Id.
150
. Infra Subsection IV.A.1.
151
. Infra Subsection IV.A.2.
152
. Chen & Padin, supra note 6.
153
. Id.; CAL. BUS. & PROF. CODE § 7449 (West 2022).
154
. CAL. BUS. & PROF. CODE § 7449 (West 2022).
155
. See Kari Paul, Prop 22 Explained: How California Voters Could Upend the Gig Economy, GUARDIAN
(Oct. 15, 2020), https://www.theguardian.com/us-news/2020/oct/15/proposition-22-california-ballot-measure-
explained (on file with the University of the Pacific Law Review) (inferring that drivers and labor groups oppose
Prop 22 because it provides weaker benefits and wages to app-based drivers compared to AB 5).
156
. Chen & Padin, supra note 6.
157
. CAL. BUS. & PROF. CODE § 7449 (West 2022).
158
. See Siddiqui & Tiku, supra note 3 (“Nowhere does [the law] say employees have to give up flexibility
in order to have worker protections”); CAL. LAB. CODE §§ 226.7, 512 (West 2022); Brinker Rest. Corp. v. Superior
Court, 53 Cal. 4th 1004 (2022).
159
. CAL. LAB. CODE § 226.7; CAL. LAB. CODE § 512 (West 2022), invalidated by Int’l Brotherhood of
Teamsters, Local 2785 v. Fed. Motor Carrier Safety Admin., 986 F.3d 841 (9th Cir. 2021).
160
. CAL. LAB. CODE § 512 (West 2022), invalidated by Int’l Brotherhood of Teamsters, Local 2785 v.
2022 / A Wolf in Sheep’s Clothing
98
may work more than eight hours a day, but an employer must pay overtime for
those hours.
161
Since there are no predictive scheduling requirements under the
Californian Labor Code, Prop 22’s concerns of mandating a set schedule for
drivers are illegitimate.
162
Prop 22 promised to secure numerous benefits and protections for gig-
economy workers.
163
The law provides health care subsidies, a guaranteed
minimum earning level, and protections similar to workers’ compensation.
164
However, Prop 22’s caveats in the law weaken these benefits significantly.
165
The
proposition’s 120% minimum wage earnings guarantee would appear beneficial
for drivers as it suggests drivers will receive at least $17.80 per hour; however, this
guarantee only includes engaged driving time.
166
This limiting condition means the
gig-economy company does not include a driver’s time spent waiting for a service
request in the earnings guarantee.
167
When a driver factors in all hours they spent
waiting for a request, the equivalent wage is only $5.64 an hour.
168
Additionally, the health care stipend falls short in subsidizing health
insurance.
169
Eligible drivers receive around $400 a month to subsidize their health
insurance.
170
This subsidy is just under the $448 per month for single coverage
Fed. Motor Carrier Safety Admin., 986 F.3d 841 (9th Cir. 2021); see Brinker Rest. Corp. v. Superior Court, 53
Cal. 4th 1004, 1044 (2022) (quoting the law that allows employees to waive their second meal period for shifts
less than 12 hours).
161
. CAL. LAB. CODE § 510 (West 2022).
162
. See Anthony Zaller, “Predictive Scheduling” and Scheduling Requirements Under California Law,
CAL. EMP. L. REP. (Feb. 14, 2020), https://www.californiaemploymentlawreport.com/2020/02/predictive-
scheduling-and-scheduling-requirements-under-california-law/ (on file with the University of the Pacific Law
Review) (defining predictive scheduling as an obligation for employers to release an employee’s schedule well in
advance of their shifts).
163
. A Breakdown of Prop 22 Benefits, UBER BLOG (Dec. 13, 2020),
https://www.uber.com/blog/california/p22-independent-work/ (on file with the University of the Pacific Law
Review) (stating Prop 22 would provide app-based drivers with guaranteed minimum earnings, injury protection,
healthcare stipends, among other benefits).
164
. CAL. BUS. & PROF. CODE § 7449 (West 2022).
165
. Id.; Mollaneda, supra note 20.
166
. CAL. BUS. & PROF. CODE § 7451 (West 2022); Jacobs & Reich, supra note 115 (stating that Prop 22’s
promise of 120% of the minimum wage would equate to $15.60 per hour based on the minimum wage rising to
$13 per hour in 2021 which would be $17.80 today since minimum wage is $14 in California).
167
. See Jacobs & Reich, supra note 115 (“Not paying for that time would be the equivalent of a fast-food
restaurant or retail store saying they will only pay the cashier when a customer is at the counter.”).
168
. Ken Jacobs & Michael Reich, Uber and Lyft Initiative Guarantees Only $5.64 an Hour, UC BERKLEY
LAB. CTR. (Oct. 31, 2019), https://laborcenter.berkeley.edu/the-uber-lyft-ballot-initiative-guarantees-only-5-64-
an-hour-2/ (on file with the University of the Pacific Law Review).
169
. See Mollaneda, supra note 20 (stating that under Prop 22, Uber’s health care stipend only pays for a
fraction of the cheapest health care plan for a family offered on Affordable Care Act exchanges).
170
. See A Breakdown of Prop 22 Benefits, supra note 163 (informing that the healthcare stipend for
eligible drivers is $1,227.54 for the quarter, which is $409.18 a month).
The University of the Pacific Law Review / Vol. 54
99
insurance premium for the lowest-tiered health insurance plan.
171
Furthermore, the
subsidy covers less than half of the $1,041 family coverage premium, whereas
other employee benefit programs provide family plans for dependents.
172
Not only was Prop 22 disingenuous, but TNCs also participated in deceitful
strategies to convince Californian legislators, workers, and voters that their
workers are independent contractors.
173
Before Prop 22, Uber granted drivers more
control, allowing drivers to set their fare prices and see passengers’ destinations
before accepting ride requests.
174
As soon as Prop 22 went into effect, Uber
revoked this control now that the company no longer needed to prove drivers were
independent contractors.
175
Moreover, reports show gig companies are not
following through on Prop 22’s promised benefits, as many drivers are not
receiving the health care stipends that they are eligible for.
176
Prop 22’s attractive
promises and TNCs’ temporary perks for workers baited California voters into
enacting subpar protections.
177
Then, once Prop 22 went into effect, these
companies switched their policies to their workers’ detriment.
178
2. Ramifications for App-Based Drivers
Prop 22’s major purpose was to protect TNCs from possessing too much
responsibility over their workers.
179
In exchange for Prop 22’s minimal benefits,
California gig-economy drivers lost a plethora of protections and entitlements that
an employee classification guarantees.
180
The law does not entitle app-based
drivers to overtime compensation, paid time off, or unemployment insurance as
independent contractors.
181
In response to COVID-19, California created a new
unemployment program to assist those ineligible for regular unemployment
benefits, including app-based drivers.
182
171
. Anna Porretta, How Much Does Individual Health Insurance Cost, EHEALTH (Nov. 24, 2020),
https://www.ehealthinsurance.com/resources/individual-and-family/how-much-does-individual-health-
insurance-cost (on file with the University of the Pacific Law Review).
172
. Id.
173
. See Press, supra note 7 (stating gig companies used Prop 22’s purported benefits, including mandatory
wage minimums and health insurance stipends, to trick voters and drivers into supporting the proposition).
174
. Tyler Sonnemaker, Uber Gave Drivers More Control to Prove They’re Independent. Now the
Company Is Taking Back Control Because Drivers Actually Used It, INSIDER (Apr. 5, 2021),
https://www.businessinsider.com/uber-california-driver-independent-contractors-pricing-destinations-prop-22-
passage-2021-4 (on file with the University of the Pacific Law Review).
175
. Id.
176
. Press, supra note 7.
177
. Press, supra note 7.
178
. Sonnemaker, supra note 174; Chen & Padin, supra note 6.
179
. CAL. BUS. & PROF. CODE § 7449 (West 2022); Mollaneda, supra note 20.
180
. CAL. BUS. & PROF. CODE § 7449 (West 2022); Mollaneda, supra note 20.
181
. CAL. BUS. & PROF. CODE § 7449 (West 2022); Mollaneda, supra note 20.
182
. Siddiqui & Van Dam, supra note 14; Press Release, U.S. Senator Dianne Feinstein, Self-Employed,
Part-Time and Gig Workers Can Now Apply for Unemployment Benefits (Apr. 28, 2020),
https://www.feinstein.senate.gov/public/index.cfm/press-releases?ID=91191FD9-9ECF-448E-B533-
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100
In addition to losing employee protections and entitlements, app-based drivers
pay more in taxes as independent contractors.
183
An employee normally pays 6.2%
in Social Security taxes and 1.45% in Medicare taxes, while the employer pays the
remaining other half.
184
As an independent contractor, the app-based driver will
pay both halves, paying 12.4% in Social Security taxes and 2.9% in Medicare
taxes.
185
TNCs undoubtedly received the benefit of the new arrangement as Prop
22 passed these expenses to the their drivers.
186
This transfer of monetary
obligations to their lowest-tiered workers demonstrates that Prop 22 does not have
the app-based driver’s best interest at heart.
187
A troubling aspect of Prop 22’s Loss and Liability Protection is that the policy
only covers the driver’s gig-economy earnings.
188
Since the proposition insists its
earning opportunity is a “side-gig” for people to earn extra income, then this
assertion assumes drivers have another source of income.
189
If TNCs only provide
compensation for earnings under the gig economy, then TNCs leave drivers
without compensation for their main source of income.
190
Less than ten percent of
drivers work for TNCs more than 32 hours a week, so this compensation program
leaves ninety percent of their drivers under-protected.
191
California workers’
compensation requires an employer cover the employee’s lost wages from all
employers, which is significantly more protection than Prop 22’s policies.
192
Workers’ compensation is an essential protection for workers in dangerous
occupations; driving is one of the most dangerous activities in daily life, making
app-based driving an incredibly dangerous “side-gig.”
193
Some car accidents cause
permanent disabilities and can preclude a person from returning to their
employment.
194
Under Prop 22’s liability protection, gig-economy companies only
BF257066CBD0 (on file with the University of the Pacific Law Review).
183
. Liz Weston, What Gig Workers Need to Know About Taxes, ASSOCIATED PRESS (Feb. 8, 2021),
https://apnews.com/article/personal-taxes-medicare-coronavirus-pandemic-a8d2ea241381ecd5193b3306111
c05cf (on file with the University of the Pacific Law Review).
184
. Id.
185
. Id.
186
. Mollaneda, supra note 20; Harnett, supra note 28.
187
. Harnett, supra note 28.
188
. See CAL. BUS. & PROF. CODE § 7455 (West 2022) (creating a special workers’-compensation like
program specifically for the gig-economy independent contractor).
189
. Id.
190
. CAL. BUS. & PROF. CODE § 7456 (West 2022).
191
. LOUIS HYMAN ET AL., CORNELL UNIV., PLATFORM DRIVING IN SEATTLE 33 (2020).
192
. CAL. LAB. CODE. § 4453(c)(2) (West 2022).
193
. See Injuries and Violence Are Leading Causes of Death, CDC (Feb. 11, 2021),
https://www.cdc.gov/injury/wisqars/animated-leading-causes.html (on file with the University of the Pacific Law
Review) (showing motor vehicle accidents as leading cause of unintentional death for ages 1–44 from 1981–
2019).
194
. Darnel Murgatroyd et al., Predictors of Return to Work Following Motor Vehicle Related Orthopaedic
Trauma, 17 BMC MUSCULOSKELETAL DISORDERS 1, 4 (2019).
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101
compensate injured drivers for their side-gig income.
195
This program could
potentially leave many workers without an adequate source of income; should the
worker sustain injuries while working for TNCs.
196
B. Prop 22 Secures an Unconscionable Contract
The doctrine of unconscionability is traditionally a defense a contracting party
invokes to void a contract, but the doctrine does not hold contracts preemptively
unenforceable.
197
However, this Comment employs the unconscionability analysis
to show the unfair and inequitable terms gig-economy companies offer their
workers.
198
Subsection 1 details how gig-economy worker contracts are
procedurally unconscionable.
199
Subsection 2 explains how gig-economy worker
contracts are substantively unconscionable.
200
1. An Employment Contract That’s Surprisingly Oppressive
Many gig-economy workers’ contracts are rife with oppression.
201
TNCs have
significantly more resources and capital than app-based drivers, as TNCs have
access to billions of dollars and expensive legal advocacy.
202
In comparison,
drivers have significantly less bargaining power because they do not have the same
political and financial resources to fairly negotiate their contracts.
203
Frequently,
drivers are young immigrants with low education levels, and more than half have
dependents.
204
The TNCs are one of the few avenues where workers can access the
market; as the app gathers customers and drivers cannot reach potential customers
without the app.
205
These factors give TNCs superior bargaining power; providing
little to no opportunity for workers to negotiate contract terms.
206
If the worker
195
. CAL. BUS. & PROF. CODE § 7455 (West 2022).
196
. Mollaneda, supra note 20.
197
. CAL. CIV. CODE § 1670.5 (West 2022).
198
. Kerbey Kniss, Uber’s Arbitration Trickery: Mohamed’s Holding, the New Era of Limiting the Scope
of Administration Protection and the Vindication of Rights Doctrine, 51 J. MARSHALL L. REV. 439, 482 (2018).
199
. Infra Subsection V.B.1.
200
. Infra Subsection V.B.2.
201
. Submission from Marshall Steinbaum, Professor, Univ. of Utah, Econ. Dep’t, to H. Judiciary
Subcomm. on Antitrust, Com. & Admin. Law (Apr. 2020), https://judiciary.house.gov/uploadedfiles/
submission_from_marshall_steinbaum.pdf (on file with the University of the Pacific Law Review).
202
. Iqbar, supra note 100.
203
. JAMES PARROTT & MICHAEL REICH, CTR. FOR N.Y.C. AFF., AN EARNINGS STANDARD FOR NEW
YORK CITY’S APP-BASED DRIVERS: ECONOMIC ANALYSIS AND POLICY ASSESSMENT 16 (2018).
204
. See id. (reporting that many app-based drivers are young immigrants with low education levels, over
half have children).
205
. Steinbaum, supra note 201; Kniss, supra note 198, at 482; Richard Bales & Christian Woo, The Uber
Million Dollar Question: Are Uber Drivers Employees or Independent Contractors?, 68 MERCER L. REV. 461,
479 (2017).
206
. Compare Cubic Corp. v. Marty, 185 Cal. App. 3d 438, 450 (1986) (finding an adhesive employment
contract between an employer and employee because the employee had no opportunity to negotiate and had to
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102
wants to participate in the market, they must agree to the gig-economy company’s
terms on a take-it-or-leave-it basis.
207
This relationship is a textbook adhesion
contract.
208
Much of the gig-economy worker contract terms—and the consequences of
those terms—are a surprise to many gig-economy workers.
209
Many terms-of-
service agreements exceed twenty pages and include addendums that a user must
access through separate links.
210
Buried in these long-winded clauses, the Lyft
agreement finally relays that the worker is an independent contractor, not an
employee.
211
However, the driver addendum does not contain information relaying
that drivers are independent contractors; the general terms-of-service agreement
contains this information.
212
The “Yes on 22” advertisement campaign misled many California voters about
Prop 22’s ramifications.
213
Thus, it is a safe assumption that many California
drivers do not fully understand what an independent contractor classification
entails.
214
The Lyft agreement states the company does not control the worker’s
hours nor how the worker performs the service.
215
However, the terms do not
explain that an independent contractor pays a greater proportion in state and federal
taxes, nor that independent contractors are ineligible for employee benefits.
216
Potential drivers must find other sources that explain these stipulations, making
the exact terms of an independent contractor status surprising indeed.
217
accept the terms on a “take-it-or-leave-it” basis), with Bales & Woo, supra note 205, at 479 (detailing how Uber
drivers do not have an opportunity to negotiate terms regarding their performance and compensation for their
work).
207
. Miriam Cherry, A Global System of Work, a Global System of Regulation?: Crowdwork and Conflicts
with Law, 94 TUL. L. REV. 183, 224–25 (2020).
208
. See Adhesion Contract, BLACK’S LAW DICTIONARY (11th ed. 2019) (defining ‘adhesion contract” as
a standard-form contract, which the party with more bargaining power creates, that the weaker party agrees and
signs on a “take-it-or-leave-it” basis).
209
. Siddiqui & Tiku, supra note 3.
210
. Compare OTO, LLC v. Kho, 8 Cal. 5th 111, 128 (2019) (finding an element of surprise in an
employment contract requiring arbitration, as the contract set terms in legal jargon within a lengthy “visually
impenetrable” paragraph wall of text), with Lyft Terms of Service, LYFT, https://www.lyft.com/terms (last updated
Apr. 1, 2021) (on file with the University of the Pacific Law Review) (presenting a long terms of service agreement
that requires the reader to click a separate link to read the Driver Addendum), and Lyft Driver Addendum, LYFT,
https://www.lyft.com/terms/driver-addendum (last updated Dec. 9, 2020) (on file with the University of the
Pacific Law Review) (setting forth a driver agreement separate from the general terms of service agreement).
211
. Lyft Terms of Service, supra note 210.
212
. Id.; Lyft Driver Addendum, supra note 210.
213
. LeGardye, supra note 4.
214
. See Siddiqui & Tiku, supra note 3 (“[V]oters who spoke with The Washington Post said they didn’t
realize they were choosing between benefits guaranteed through employment and an arbitrary set of supplemental
benefits.”); see also Stevens, supra note 1 (warning other gig-economy drivers of Prop 22’s implications, as the
author describes how the “Yes on 22” campaign misled him about protections an employee classification entails).
215
. Lyft Driver Addendum, supra note 210.
216
. Id.
217
. Joann Weiner, The Hidden Costs of Being an Uber Driver, WASH. POST (Feb. 20, 2015),
https://www.washingtonpost.com/news/get-there/wp/2015/02/20/the-hidden-costs-of-being-an-uber-driver/ (on
file with the University of the Pacific Law Review).
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103
2. An Employment Contract So Unfair, It’s Shocking
Prop 22 allows a contract that reallocates most of the risks to app-based
workers, particularly drivers, as Prop 22 eliminated much of TNCs’
responsibilities to their workers.
218
The app-based driver bears the risk of property
damage and personal injury while carrying out the terms of their contract.
219
The
driver bears this risk while also standing as the party with fewer resources and less
bargaining power.
220
Injuries a driver sustains while working their “side-gig” can
leave them unable to work their full-time occupation.
221
Compared to the
considerable risk drivers incur, TNCs take on little to no risk as Prop 22
indemnifies the company from most costs the injury or property damage
produces.
222
Prop 22 requires gig-economy companies to provide workers
compensation only for gig-economy income.
223
Thus, on average, the company
bears the risk of a few hundred dollars a week, while the driver goes without their
main source of income.
224
Additionally, Prop 22 removes vicarious liability for gig-economy companies
by codifying their workers as independent contractors.
225
Should a passenger sue
a driver, the driver is responsible for all legal fees and damages as an independent
218
. Compare Ellis v. McKinnon Broad. Co., 18 Cal. App. 4th 1786, 1806 (1993) (finding an employment
contract provision, which required the employee to forfeit $20,000 in commission compensation, as substantively
unconscionable because the result was unjustifiably one-sided), with Harnett, supra note 29 (detailing how Prop
22 indemnifies TNCs from ensuring their drivers earn fair compensation for the work the driver performs for the
company).
219
. MISHEL & MCNICHOLAS, supra note 77, at 13–14; Injuries and Violence Are Leading Causes of
Death, supra note 193.
220
. Compare Uber (UBER), FORBES, https://www.forbes.com/companies/uber/?sh=4017455b10b0 (last
updated Jan. 7, 2022) (on file with the University of the Pacific Law Review) (showing Uber’s assets of $33.3
billion and revenue of $12.1 billion), with Hope Mutie, How Much Do Lyft Drivers Make?, GOBANKINGRATES
(Oct. 20, 2021), https://www.gobankingrates.com/money/side-gigs/how-much-do-lyft-drivers-make/ (on file
with the University of the Pacific Law Review) (estimating that a typical driver, driving 40 hours a week, earns
between $1,900 and $2,700 a month).
221
. Murgatroyd et al., supra note 194, at 4.
222
. Contra CAL. BUS. & PROF. CODE § 7455 (West 2022) (mandating ridesharing companies maintain
insurance to compensate driver-caused injuries and losses to third parties). But see CAL. BUS. & PROF. CODE §
7455 (West 2022) (limiting the liability insurance to instances where the driver’s personal insurance does not
cover the loss, meaning the driver must expend their insurance before the company pays out). Compare Serpa v.
California Sur. Investigations, Inc., 215 Cal. App. 4th 695, 709 (2013) (finding an unconscionable employment
contract where the provision required employees to bear their own attorney fees, as the term prevents employees
from seeking remedy due to lack of resources), with CAL. BUS. & PROF. CODE § 7455 (West 2022) (obliging
TNCs to a substantially lower compensation standard to injured drivers than what the law guarantees to
employees).
223
. CAL. BUS. & PROF. CODE § 7455 (West 2022).
224
. CAL. BUS. & PROF. CODE § 4453 (West 2022); CAL. DEP’T INDUS. REL., DWC ANNOUNCES
TEMPORARY TOTAL DISABILITY RATES FOR 2021, RELEASE NO. 2020-95 (Nov. 5, 2020) (reporting the minimum
weekly disability payment rate as $203.44 and the maximum rate as $1,356.31).
225
. See J. W. Neyers, A Theory of Vicarious Liability, 43 ALBERTA L. REV. 287, 290 (2005) (noting that
the law imposes liability on employers for the injurious actions of their employees, but not for independent
contractors).
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104
contractor, whereas an employer is typically responsible for such expenses.
226
In
the event a driver’s negligence injures a passenger, gig-economy companies’
$1,000,000 liability insurance only triggers after a driver exhausts their personal
insurance policy.
227
Thus, legal fees, medical expenses, and court awarded
damages could financially cripple a gig-economy driver with significantly less
capital and resources than gig-economy companies.
228
Furthermore, the driver may
not have the resources to adequately compensate an injured third-party; a problem
vicarious liability aims to resolve.
229
Prop 22 secured a contract where the gig-economy driver shoulders the
majority of the risks as the party with substantially less bargaining power and
resources.
230
This working relationship requires the driver to perform the majority
of the work and risk injury or financial ruin, while the company avoids these risks
and collects a fee.
231
Moreover, Prop 22 implemented various loopholes for gig-
economy companies where the company can evade paying the costs of Prop 22’s
mandated benefits and compensation.
232
Prop 22 cleverly reallocated almost all
risk to the gig-economy worker, creating a contract with terms so unfair it shocks
the conscience.
233
C. Gig-Economy Workers Are Employees, Not Independent Contractors
Under the ABC test, app-based drivers are employees, not independent
contractors.
234
To satisfy part A of the test, a hiring entity must not control or direct
how a worker performs the work.
235
TNCs argue that drivers are free from control
because drivers use their own cars and choose when to work.
236
However, TNCs
exert significant control over their drivers.
237
TNCs use algorithmic supervision,
226
. See id.; see also Lyft Terms of Service, supra note 210 (“By using the Lyft Platform. . . you agree to
accept such risks and agree that Lyft is not responsible for the acts or omissions of Users on the Lyft Platform.”).
227
. CAL. BUS. & PROF. CODE § 7455 (West 2022); Curtis Lee, I Was Injured While Riding in an Uber or
Lyft Vehicle, NOLO, https://www.nolo.com/legal-encyclopedia/i-was-injured-while-riding-in-an-uber-or-lyft-
vehicle.html (last visited Jan. 9, 2022) (on file with the University of the Pacific Law Review).
228
. See How Much is the Average Settlement for a Car Accident in California, RIST L. OFF.,
https://www.sdvictimlaw.com/how-much-is-the-average-settlement-for-a-car-accident-in-califor.html (last
visited Jan. 9, 2022) (on file with the University of the Pacific Law Review) (citing the average settlement amount
for a car accident in California as $21,000); Uber (UBER), supra note 220; Mutie, supra note 220.
229
. Neyers, supra note 225, at 292.
230
. Harnett, supra note 28.
231
. MISHEL & MCNICHOLAS, supra note 77, at 14; Injuries and Violence Are Leading Causes of Death,
supra note 193.
232
. Press, supra note 7.
233
. CAL. BUS. & PROF. CODE §§ 7448–7467 (West 2021); Serpa v. California Sur. Investigations Inc.,
215 Cal. App. 4th 695, 703–04 (2013) (discussing whether the contract shocked the conscience).
234
. CAL. LAB. CODE § 2775 (West 2022); MISHEL & MCNICHOLAS, supra note 77, at 9.
235
. CAL. LAB. CODE § 2775 (West 2022).
236
. N.L.R.B., OFF. OF THE GEN. COUNS., 13-CA-163062, ADVICE MEMORANDUM (2019).
237
. MISHEL & MCNICHOLAS, supra note 77, at 10.
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105
rather than traditional human supervision.
238
The app monitors drivers’ acceptance
rates, time on trips, their speed, driving acceleration, routes, and cancellation
rates.
239
Poor performance on these factors can cause the app to deactivate a
driver’s account—effectively firing them.
240
Moreover, many TNCs require app-
based drivers to accept a ride before the app reveals the destination and how much
they will earn from the fare.
241
Also, TNCs usually dictate which route a driver
takes, and some TNCs can adjust the fare price if the app deems the driver took an
inefficient route.
242
This algorithmic oversight shows drivers have little control
over most aspects of the work they perform.
243
To satisfy part B of the test, the hiring entity must show that the worker is not
performing work integral to the hiring entity’s business.
244
App-based drivers do
not satisfy this part of the test.
245
The work drivers perform for TNCs is the whole
premise of the business model: they are performing rides and deliveries for a
company that sells rides and deliveries to paying customers.
246
Any
counterargument against this premise is preposterous.
247
Finally, app-based drivers do not satisfy part C of the test.
248
Part C requires
workers to regularly work in an independent occupation of the same nature as the
work they perform for the hiring entity.
249
TNCs argue drivers satisfy part C
because drivers can work for competing TNCs simultaneously.
250
However, that
argument is a misapplication of the ABC test.
251
An indicator that a worker is in
238
. Id.
239
. Id.
240
. Id.; Uber Community Guidelines, UBER (Sept. 2019), https://www.uber-assets.com/image/upload/
v1571164076/legal/doc/ANZ_community_guidelines.pdf (on file with the University of the Pacific Law Review).
241
. See MISHEL & MCNICHOLAS, supra note 77, at 9 (showing that for most of Uber’s time in business,
they did not let drivers see the destination before accepting the ride). But see Sonnemaker, supra note 174
(reporting that Uber temporarily gave drivers more control, then took it back shortly after); contra Doug H.,
Upfront Fares on Uber: Trip Radar Shows Ride Payout and Passenger Destination, RIDESHARING DRIVER (Feb.
22, 2022), https://www.ridesharingdriver.com/uber-driver-upfront-fares/ (on file with the University of the
Pacific Law Review) (detailing that Uber may be changing its policy soon by letter drivers see passenger
destinations before accepting a ride, but this is not in effect yet). See Just How Far is Your Uber Driver Willing
to Take You, FORBES (Mar. 24, 2015), https://www.forbes.com/sites/harrycampbell/2015/03/24/just-how-far-is-
your-uber-driver-willing-to-take-you/?sh=3d8540dd597c (on file with the University of the Pacific Law Review)
(explaining how drivers’ inability to see rider destinations before accepting can cause the driver to end up hours
away from their home market, losing hours of potential rides on the drive back).
242
. MISHEL & MCNICHOLAS, supra note 77, at 9; Uber Community Guidelines, supra note 240.
243
. MISHEL & MCNICHOLAS, supra note 77, at 9; Lawrence Mishel & Celine McNicholas, supra note 77;
CAL. LAB. CODE § 2775 (West 2022).
244
. CAL. LAB. CODE § 2775 (West 2022).
245
. Advice Memorandum from Jayme Sophir, Assoc. Gen. Couns. Of N.L.R.B. to Jill Coffman, Reg’l
Dir. Of N.L.R.B. (Apr. 16, 2019) (on file with University of the Pacific Law Review).
246
. Id.
247
. See id. (conceding that the work Uber drivers perform is essential to the business).
248
. MISHEL & MCNICHOLAS, supra note 77, at 10–11; Uber Community Guidelines, supra note 240.
249
. CAL. LAB. CODE § 2775 (West 2022).
250
. Advice Memorandum from Jayme Sophir, Assoc. Gen. Couns. of N.L.R.B. to Jill Coffman, Reg’l
Dir. of N.L.R.B. (Apr. 16, 2019) (on file with University of the Pacific Law Review).
251
. See Dynamex Operations W. v. Superior Court, 4 Cal. 5th 903, 962 (2018) (holding that a company
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106
an independent occupation is when the worker takes steps to promote and facilitate
their independent business.
252
Examples of these steps include licensing,
marketing, advertising, and routine offerings of their individual services to
potential customers without a hiring entity’s facilitation.
253
An app-based driver
cannot access the market without a TNC.
254
Also, TNCs do not allow drivers to
build a customer base, nor do they allow drivers to offer additional services to
increase their revenue.
255
Since drivers are completely dependent on the TNC to
provide services, then they do not work independently from the company.
256
V. PAY NO ATTENTION TO THAT MAN BEHIND THE CURTAIN: UBER AND LYFT
OBSCURING THE TRUTH OF EMPLOYMENT CLASSIFICATION AND PROFITABILITY
In their advocacy to maintain Prop 22, TNCs have espoused rhetoric that app-
based drivers want an independent contractor classification. Further TNCs have
stated that the legislature should uphold the will of the people.
257
However, perhaps
the proper question is not what app-based drivers want, but rather what protections
do app-based drivers need.
258
Section A argues that Prop 22’s eroding of worker
protections will have a lasting impact.
259
Section B demonstrates app-based drivers
can have employee protections while retaining flexibility in their work hours.
260
A. Prop 22 Focuses on The Wrong Problem and Creates New Ones
Uber and Lyft postulate that one of their main intentions behind Prop 22 is to
promote their drivers’ right to choose and maintain their flexible working hours.
261
TNCs are not promoting Prop 22 out of benevolence for their drivers; they are
that does not prohibit workers from engaging in other work is not sufficient to establish the worker is in the
business independently).
252
. Id.
253
. MISHEL & MCNICHOLAS, supra note 77, at 10–11; Uber Community Guidelines, supra note 240
(providing no steps for a driver to create an independent business).
254
. MISHEL & MCNICHOLAS, supra note 77, at 6; see also Uber Community Guidelines, supra note 240
(omitting any opportunity to build a customer service).
255
. MISHEL & MCNICHOLAS, supra note 77, at 7; Uber Community Guidelines, supra note 240.
256
. Mishel & McNicholas, supra note 77, at 7; Uber Community Guidelines, supra note 240.
257
. Prop 22 Passed: Moving Forward with New Driver Benefits, LYFT (Nov. 4, 2020),
https://www.lyft.com/blog/posts/ca-prop22-election-results (on file with the University of the Pacific Law
Review); A New Way Forward for Independent Work, UBER (Dec. 13, 2020),
https://www.uber.com/blog/california/p22-independent-work/ (on file with the University of the Pacific Law
Review).
258
. McGeorge School of Law, California Dreaming: Regulating the Gig Economy, YOUTUBE (Mar. 1,
2022), https://www.youtube.com/watch?v=Z6ANEJ07xjc (on file with the University of the Pacific Law Review).
259
. Infra Section V.A.
260
. Infra Section V.B.
261
. Prop 22 Passed: Moving Forward with New Driver Benefits, supra note 257; A New Way Forward
for Independent Work, supra note 257.
The University of the Pacific Law Review / Vol. 54
107
promoting Prop 22 to scapegoat their profitability issues and avoid paying taxes.
262
Subsection 1 explains how Uber and Lyft’s business models are unsustainable.
263
Subsection 2 details how Prop 22 saves TNCs money by burdening the public.
264
Subsection 3 describes how Prop 22 started a new trend eroding worker’s rights
and protections.
265
1. Employment Costs Are Not the Problem
Uber and Lyft have been unprofitable since their conception, even when they
classify drivers as independent contractors.
266
The companies have predicted they
will turn a profit the next quarter.
267
Yet they never have, and nothing in the market
shows this will change any time soon.
268
The first major barrier to ride-sharing
companies’ profitability is the exorbitant insurance costs.
269
These costs are so
burdensome that the insurance company, James River, actually ended its contract
with Uber in 2019.
270
Uber’s contract with James River drained eighty-seven
percent of the insurance company’s cash reserves, and such a drain is unsustainable
for any insurance company.
271
With insurance costs contributing to around fifty
percent of TNCs’ operating expenses, TNCs must find expenditures to cut their
operating expenses in other areas.
272
The second major barrier to TNCs’ profitability is the lack of available
drivers.
273
When there are more ride requests than available drivers, then TNCs
lose money because potential customers choose other means of transportation due
to long wait times.
274
Uber and Lyft have implemented numerous incentive
programs to attract more drivers, spending hundreds of millions of dollars on sign-
up bonuses and marketing.
275
However, with the uncertainty of the pandemic, lack
262
. Harnett, supra note 28.
263
. Infra Subsection V.A.1.
264
. Infra Subsection V.A.2.
265
. Infra Subsection V.A.3.
266
. Poletti, supra note 99.
267
. See Porter, supra note 101 (reporting that Uber predicts their adjusted profits for quarter three, 2021
will be up to $25 million).
268
. Poletti, supra note 99; Horan, supra note 102, at 49.
269
. Kowaleski, supra note 104.
270
. Suzanne Barlyn, Why James River Insurance Dumped Uber Account, INS. J. (Nov. 8, 2019),
https://www.insurancejournal.com/news/national/2019/11/08/547942.htm (on file with the University of the
Pacific Law Review).
271
. Id.
272
. Kowaleski, supra note 104.
273
. Andrew Hawkins, Uber and Lyft Have a Driver Shortage Problem and It’s Costing Them a Lot of
Money, VERGE (Apr. 7, 2021), https://www.theverge.com/2021/4/7/22371850/uber-lyft-driver-shortage-covid-
bonus-stimulus (on file with the University of the Pacific Law Review).
274
. Id.
275
. Id.
2022 / A Wolf in Sheep’s Clothing
108
of protections for drivers, and low earnings, these TNCs are struggling to maintain
a healthy number of drivers.
276
Perhaps if these companies gave their drivers
protections and benefits, then they would struggle less to retain enough drivers.
277
Prop 22’s proponents claimed that an employee classification would cause
income-earning opportunities to disappear.
278
However, the market shows this
claim is not entirely accurate, since TNCs were not profitable even when they
classified drivers as independent contractors prior to AB 5.
279
Uber and Lyft have
only stayed in business due to generous investors and shareholder funds that
supplement their operating expenses.
280
These investors are now placing pressure
on these TNCs to generate profit, or they will pull funding as the investors are not
seeing a return on their investment.
281
With no clear change in the market or signs
insurance expenses are lessening; it seems unlikely that Uber or Lyft will generate
a profit in the near future.
282
Investors will pull out eventually; leaving Uber and
Lyft unable to pay their operating expenses.
283
Prop 22 was supposed to save the
gig economy, but instead it delayed the inevitable downfall of the app-based driver
model.
284
2. Prop 22 is an Elaborate Tax-Avoiding Scheme
TNCs claim paying an hourly wage is too great of a financial burden for them
to bear.
285
However, the increase of expenses TNCs would incur are mostly from
additional taxes, not from paying minimum wage.
286
Both federal law and
276
. Levi Sumagaysay, Uber Spending $250 Million to Lure Drivers Back to Work as Pandemic
Restrictions Ease, MARKETWATCH (Apr. 7, 2021), https://www.marketwatch.com/story/uber-spending-250-
million-to-lure-drivers-back-to-work-as-pandemic-restrictions-ease-11617835211?mod=levi-sumagaysay&mod
=article_inline (on file with the University of the Pacific Law Review).
277
. See Tyler Sonnemaker, Uber and Lyft Drivers Who Say They Don’t Want to Drive for the Ride-Share
Companies Now Are Holding Out for Higher Pay and Better Working Conditions. Others Say They May Never
Return, INSIDER (Apr. 20, 2021), https://www.businessinsider.com/why-uber-lyft-expensive-taking-long-driver-
shortage-2021-4 (on file with the University of the Pacific Law Review) (explaining the exodus of app-based
drivers due to low pay and poor working conditions).
278
. See CAL. BUS. & PROF. CODE § 7449 (West 2022) (claiming the legislation that classifies drivers as
employees threatened to take away the work opportunities that TNCs provide).
279
. Poletti, supra note 99.
280
. Id.
281
. Laura Forman, Uber, Lyft Drive Investors Away, WALL ST. J. (Aug. 4, 2021),
https://www.wsj.com/articles/uber-lyft-drive-investors-away-11628115638 (on file with the University of the
Pacific Law Review).
282
. Horan, supra note 102, at 49.
283
. Forman, supra note 281.
284
. David Trainer, The Emperor Has No Clothes—Uber’s Business Model Is Broken, FORBES (Sept. 9,
2022), https://www.forbes.com/sites/greatspeculations/2020/09/09/the-emperor-has-no-clothes—ubers-business
-model-is-broken/?sh=656ad6bc706a (on file with the University of the Pacific Law Review).
285
. Uber, Registration Statement (Form S-1) (Apr. 11, 2019); Lyft, Registration Statement (Form S-1)
(Feb. 9, 2019).
286
. See 29 C.F.R. § 531.55 (2022) (allowing employers to utilize mandatory service fees the employer
imposes on customers to satisfy minimum wage obligations).
The University of the Pacific Law Review / Vol. 54
109
California law allow employers to use service charges to satisfy minimum wage
obligations.
287
TNCs impose a fare charge on riders that TNCs use to pay the
driver, which qualifies the charge as a service fee.
288
The fee drivers receive
directly from riders is a service fee, and TNCs can use these service fees to satisfy
their minimum wage obligations.
289
Thus, if the market is strong and drivers
perform enough rides, then these service fees should exceed minimum wage.
290
Therefore, TNCs are only responsible for a 12% tax on those service fees, making
Prop 22 an elaborate method for businesses to avoid taxes.
291
This is particularly
problematic as TNCs did not contribute to Pandemic Unemployment Assistance
(PUA); where the government provided at least $80 million in relief to gig-
economy drivers.
292
Prop 22 shifted the burden of market performance away from
the company and onto drivers and California taxpayers.
293
Another significant expense TNCs reel against is providing health insurance
benefits to their drivers.
294
However, this fear is not legitimate as ninety percent of
their drivers drive less than thirty hours per week.
295
The ACA does not obligate
employers to provide health insurance to employees working less than thirty hours
a week.
296
Also, since most drivers work part-time, then they often have another
form of employment, and their main employer probably provides health
insurance.
297
Additionally, if major corporations are trying to avoid providing
health insurance, they should probably focus their efforts in promoting legislation
287
. See 29 C.F.R. § 351.55 (2022) (defining service charges as a “compulsory service charge, such as 15
percent of the bill,” that employers impose on customers, which is not a tip).
288
. See How Your Pay is Calculated, LYFT (July 29, 2019), https://www.lyft.com/hub/posts/pay-
breakdown (on file with the University of the Pacific Law Review) (showing that customers pay a fare rate for the
gig-company’s services, which qualifies it as a service charge); Janet Grumer, Aaron Colby & Paul Rodriguez,
When Does a Service Charge Become a Tip in California, DAVIS, WRIGHT, TREMAIN, LLP (Nov. 12, 2019),
https://www.dwt.com/blogs/employment-labor-and-benefits/2019/11/california-service-charge-tips-law (on file
with the University of the Pacific Law Review).
289
. 29 C.F.R. § 531.55 (2022).
290
. See 29 C.F.R. § 531.55 (2022) (showing that TNCs will need to pay wages outside of those service
charges only when the market is poor and such service charges do not match minimum wage).
291
. Campell, supra note 106.
292
. Siddiqui & Van Dam, supra note 14.
293
. Uber, Registration Statement (Form S-1) (Apr. 11, 2019); Lyft, Registration Statement (Form S-1)
(Feb. 9, 2019).
294
. LOUIS HYMAN ET AL., CORNELL UNIV., PLATFORM DRIVING IN SEATTLE 33 (2020).
295
. Compare Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111–148, 124 Stat. 253
(2010) (requiring large employers to provide health insurance to full-time employees, which are employees who
work more than 30 hours a week), with LOUIS HYMAN ET AL., CORNELL UNIV., PLATFORM DRIVING IN SEATTLE
33 (2020) (showing 90% of drivers work less than 30 hours a week for TNCs).
296
. See Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111–148, 124 Stat. 253 (2010)
(applying this exception to part-time and seasonal employees).
297
. See JAMES PARROTT & MICHAEL REICH, CTR. FOR N.Y.C. AFF., AN EARNINGS STANDARD FOR NEW
YORK CITY’S APP-BASED DRIVERS: ECONOMIC ANALYSIS AND POLICY ASSESSMENT 17 (2018) (showing that
only 16% of New York City app-based drivers did not have health insurance in 2016).
2022 / A Wolf in Sheep’s Clothing
110
that socializes health care.
298
This systematic change to health care is a more
effective solution than funding convoluted legislation that realigns employment
classifications to side-step this obligation.
299
3. The Frog Boil Begins: Prop 22 Sets a Precedent that Facilitates the
Erosion of Worker Protections
300
Prop 22 has spurned a new trend in labor law.
301
The broad language of Prop
22 provided opportunity for many industries to apply Prop 22’s provisions to their
own workers by making small adjustments to their employment model.
302
If a
company avoids setting shifts for workers, allows them to pick tasks to perform,
and allows workers to work for multiple companies, then the company falls within
Prop 22.
303
As the U.S. economy is a service-based economy, this model can apply
to a multitude of jobs.
304
In fact, some start-ups are aiming to apply the gig-
economy model to retail.
305
One company, Jyve, developed an app that outsourced
single tasks for retail stores, in exchange for a one-time fee.
306
For example, a retail
location can request a user stock shelves for a few hours in exchange for $100.
307
The app would provide instructions on how to complete the task.
308
Once the user
completes the task, the app pays the user.
309
Afterwards, the user must continue
searching for other jobs.
310
298
. Phil Galewitz, Why Some CEOs Figure ‘Medicare for All’ is Good for Business, KHN (June 7, 2019),
https://khn.org/news/a-large-employer-frames-the-medicare-for-all-debate/ (on file with the University of the
Pacific Law Review) (discussing the efforts of small companies to push for socialized health care).
299
. Id.; Mollaneda, supra note 20.
300
. See the Tail of the Boiling Frog, NCBI (Dec. 7, 2004), https://www.ncbi.nlm.nih.gov/
pmc/articles/PMC534568/ (on file with the University of the Pacific Law Review) (“[I]f you put [a frog] in a pot
filled with pleasantly tepid water and gradually heat it, the frog will remain in the water until it boils to death.
Allegedly, the frog is not able to detect the gradual increase in temperature until it’s too late.”); id. (“This allegory
is frequently used in economics, business, and marketing to point out that change has to be introduced gradually
if it is to be successful.”).
301
. See Alex Press, “Uber for Nurses” May Soon Be on the Ballot in California, JACOBIN (Feb. 8, 2022),
https://jacobin.com/2022/02/app-gig-economy-travel-nursing-shortage-lean-staffing (on file with the University
of the Pacific Law Review) (reporting that there is a Prop 22 copycat ballot initiative proposal that pertains to
health care workers).
302
. CAL. BUS. & PROF. CODE § 7451 (West 2022).
303
. CAL. BUS. & PROF. CODE § 7453 (West 2022).
304
. See Service Economy, CAMBRIDGE DICTIONARY (2022) (defining service economy as “an economy
based on providing services rather than manufacturing or producing goods”).
305
. Cale Guthrie Weissman, How the Gig Economy Is Transforming Retail, MODERN RETAIL (July 18,
2019), https://www.modernretail.co/retailers/how-the-gig-economy-is-transforming-retail/ (on file with the
University of the Pacific Law Review).
306
. Id.
307
. Id.
308
. Id.
309
. Id.
310
. Id.
The University of the Pacific Law Review / Vol. 54
111
The bleeding effect Prop 22 is having on the job market outside of TNCs is
apparent in other industries as well.
311
Albertson-owned grocery stores have
recently laid off their union-run delivery drivers in favor of app-based delivery
drivers because app-based independent contractors are cheaper.
312
An even more
concerning development is the mimicking of Prop 22.
313
On January 24, 2022, the
law firm that drafted Prop 22 submitted a new initiative that applies to health care
service providers.
314
This initiative aims to classify nurses, dental hygienists, and
other health care workers who find work through apps, as independent
contractors.
315
Prop 22 has set a dangerous precedent, where many workers can
suddenly lose protections and benefits that an employee classification guaranteed
them.
316
B. Uber and Lyft’s Flexibility Argument is as Phony as Their Financial Success
TNCs promote the idea that an employee classification could never foster the
type of work environment where employees can work free of scheduled shifts.
317
This assertion is not true; employees can have protection and flexible schedules.
318
Below are only two examples of how this can work; there are probably many
more.
319
Subsection 1 posits TNCs share the burden of minimum wage obligations
through a pro-rata system.
320
Subsection 2 suggests a system that TNCs can
implement on their apps to avoid setting schedules and paying overtime.
321
311
. See Mike Dickerson, Vons, Pavilions to Fire “Essential Workers,” Replace Drivers with Independent
Contractors, KNOCKLA (Jan. 4, 2021), https://knock-la.com/vons-fires-delivery-drivers-prop-22-e899ee24ffd0/
(on file with the University of the Pacific Law Review) (showing Prop 22 has affected employees of grocery
stores, an industry people do not typically associate with transportation).
312
. Id.
313
. See Jacob Silverman, The Battle Over the Future of Gig Work Isn’t Even Close to Finished, TNR
(Aug. 23, 2021), https://newrepublic.com/article/163343/proposition-22-uber-lyft-drivers-labor-wages (on file
with the University of the Pacific Law Review) (reporting that Prop 22 copy-cat legislation has appeared in at least
three other states).
314
. See Letter from Kurt R. Oneto, Att’y with Nielsen Merksamer, LLP, to Hon. Rob Bonta, Att’y Gen.
of Cal. (Jan. 24, 2022) (on file with the University of the Pacific Law Review) (affirming that the law firm who
wrote Prop 22 has submitted a new ballot initiative that mirrors Prop 22’s provisions for app-based health care
workers).
315
. Id.
316
. Dickerson, supra note 311.
317
. Prop 22 Passed: Moving Forward with New Driver Benefits, supra note 257; A New Way Forward
for Independent Work, supra note 258.
318
. Siddiqui & Tiku, supra note 3.
319
. Infra Subsections V.B.1–2.
320
. Infra Subsection V.B.1.
321
. Infra Subsection V.B.2.
2022 / A Wolf in Sheep’s Clothing
112
1. A Pro Rata Share of Wages System
An employee status guarantees a driver minimum wage.
322
Since drivers can
be online for multiple apps simultaneously, this presents a dilemma of how each
TNC should compensate the driver for wait time.
323
This situation assumes that the
driver will earn a minimum wage from each app.
324
For example, a driver online
with Uber and Lyft at the same time could receive two paychecks of $15 an hour.
325
However, there are possible solutions that would institute a more equitable
result.
326
TNCs could establish a system that would allow them to pay their pro-rata
share of wages.
327
Many companies already use a third-party payroll management
system.
328
Thus, TNCs could agree to use the same payroll management system
where the system logs the driver’s online time and service fees in the same
database.
329
The driver could receive their service fees immediately.
330
If these
service fees do not equal minimum wage by the end of the pay period, the TNC
will pay the difference.
331
Should a driver’s service fees not equal minimum wage,
the system divides the driver’s waiting time between the TNCs the driver was
online with during that period.
332
This way, each TNC can pay their fair share of
compensation to the driver, which would alleviate some of the economic burden
322
. CAL. LAB. CODE § 1182.12 (West 2022).
323
. See CAL. BUS. & PROF. CODE § 7451 (West 2022) (demonstrating Prop 22 attempted to solve this
issue by excluding time spent waiting for a ride).
324
. See Jack Kelly, The Remote Trend of Working Two Jobs at the Same Time Without Both Companies
Knowing, FORBES (Aug. 15, 2021), https://www.forbes.com/sites/jackkelly/2021/08/15/the-remote-trend-of-
working-two-jobs-at-the-same-time-without-both-companies-knowing/?sh=3add620a17f3 (on file with the
University of the Pacific Law Review) (reporting some employees are making two paychecks by being clocked-
in at two jobs at the same time while working from home).
325
. See id. (describing how workers worked two full-time remote jobs during the pandemic but did not
work more than forty hours a week for both jobs).
326
. See Pro rata, BLACK’S LAW DICTIONARY (11th ed. 2019) (defining “pro rata” as contributing
proportionally according to the appropriate share).
327
. Compare CAL. LAB. CODE § 1182.12 (West 2022) (requiring employers to pay hourly wages, i.e., a
salary in proportion to hours the employee worked), with Pro rata, BLACK’S LAW DICTIONARY (11th ed. 2019)
(showing the term “pro rata” applies to numerous legal principles).
328
. See Payroll Software, SOFTWARE ADVICE, https://www.softwareadvice.com/hr/payroll-software-
comparison/ (last visited Mar. 6, 2022) (on file with the University of the Pacific Law Review) (listing numerous
payroll management systems companies can purchase to assist with various administrative tasks related to
scheduling and payroll).
329
. Id.
330
. How Payments Work, UBER, https://www.uber.com/us/en/drive/basics/how-payments-work (last
visited Mar. 6, 2022) (on file with the University of the Pacific Law Review).
331
. See Guaranteed Earnings Offer for New Drivers, UBER, https://www.uber.com/us/en/drive/driver-
app/new-driver-guarantees/ (last visited Mar. 6, 2022) (on file with the University of the Pacific Law Review)
(showing Uber already makes delayed payments to drivers for their guaranteed earnings policy).
332
. See Payroll Software, supra note 328 (demonstrating different business can use the same payroll
system, and these systems include time tracking services).
The University of the Pacific Law Review / Vol. 54
113
employee costs impose.
333
There are other factors TNCs would consider in
implementing a system like this, such as responsibilities for accidents and driver
misconduct, but TNCs can negotiate those issues themselves.
334
2. Capping Hours Through the App
Another issue involving working hours and compensation is overtime and
mandatory breaks.
335
Proponents of Prop 22 claimed overtime compensation and
mandatory breaks threaten drivers’ working time flexibility and forces drivers into
set schedules.
336
However, the law does not force employers to set schedules for
employees, nor does it prevent employees from working more than eight hours a
day, or forty hours a week.
337
Employers set schedules for employees to avoid
paying overtime.
338
Thus, Prop 22’s proponents deflected the blame of taking away
flexibility onto employment protections when actually the TNCs make the decision
to limit drivers’ hours.
339
There is a simple solution to avoid overtime, comply with mandatory breaks,
and still give drivers flexibility and control over when they work.
340
TNCs can cap
hours for drivers through the app.
341
Once a driver reaches eight hours of online
time in a twenty-four-hour period, or forty hours in a seven-day week, the app can
automatically turn off.
342
The driver can choose when they drive; the TNC just
allots them a finite number of hours to use.
343
Since only about four percent of
drivers drive more than forty hours a week, this system should not impact many
drivers.
344
TNCs can also implement this system for breaks.
345
When a driver
333
. See Pro rata, BLACK’S LAW DICTIONARY (11th ed. 2019) (defining pro rata in the legal context).
334
. See CAL. BUS. & PROF. CODE § 7455 (West 2022) (requiring TNCs to maintain liability insurance for
accidents with third-parties).
335
. Uber, Registration Statement (Form S-1) (Apr. 11, 2019); Lyft, Registration Statement (Form S-1)
(Feb. 9, 2019).
336
. CAL. BUS. & PROF. CODE § 7449 (West 2022).
337
. CAL. LAB. CODE §§ 226.7, 512 (West 2022); Brinker Rest. Corp. v. Superior Court, 53 Cal. 4th 1004
(2022); Siddiqui & Tiku, supra note 3.
338
. Dennis Najjar, How to Manage Overtime More Effectively, BALANCE SMALL BUS. (June 25, 2019),
https://www.thebalancesmb.com/four-ways-to-manage-overtime-more-effectively-13978 (on file with the
University of the Pacific Law Review).
339
. Siddiqui & Tiku, supra note 3.
340
. Does Being Classified as Employees Mean Drivers Will Lose Flexibility?, GRIDWISE (Sept. 15, 2020),
https://gridwise.io/does-being-classified-as-employees-mean-drivers-will-lose-flexibility (on file with the
University of the Pacific Law Review).
341
. See Introducing a New Feature: Driving Hours Limit, UBER BLOG (Apr. 23, 2018),
https://www.uber.com/en-ZA/blog/driving-hours-limit/ (on file with the University of the Pacific Law Review)
(showing TNCs are capable of implementing this system for California, because they already use this system in
South Africa).
342
. See id. (using this proposal for a twelve-hour driving limit in South Africa).
343
. Introducing a New Feature: Driving Hours Limit, UBER BLOG (Apr. 23, 2018),
https://www.uber.com/en-ZA/blog/driving-hours-limit/ (on file with the University of the Pacific Law Review).
344
. LOUIS HYMAN ET AL., CORNELL UNIV., PLATFORM DRIVING IN SEATTLE 33 (2020).
345
. Introducing a New Feature: Driving Hours Limit, supra note 341.
2022 / A Wolf in Sheep’s Clothing
114
reaches six hours of continuous online time, the app can automatically turn off for
thirty minutes to ensure the driver takes a break.
346
These alternatives are simple
to implement and show that drivers can have flexibility and protection.
347
VI. CONCLUSION
The purpose of law is to effectuate justice and protect liberties and rights.
348
Thus, the law must reallocate power between parties of vastly inequitable
bargaining power to prevent unjust exploitation and protect the rights of those with
lesser means.
349
Labor law is a major component that serves the purpose of justified
power reallocation.
350
Businesses have always fought against passing new labor
legislation that delegates more rights and protections to their employees.
351
Right
now, Prop 22’s proponents are repeating this cycle by claiming that classifying
their workers as employees will cause the end of the industry.
352
However, even
when their workers operate as independent contractors, TNCs fail to make a profit
due to exorbitant insurance costs.
353
These market conditions show the profitability
issues TNCs face do not lie with employee costs, but rather with the current
business model.
354
The inability to misclassify workers will not cause the downfall
of TNCs, but the failure to address critical weaknesses in their business model
will.
355
As the gig economy grows and more workers rely on gig-economy positions,
it is more important than ever that the California Legislature establishes regulations
to protect gig-economy workers.
356
Prop 22 creates an unfair employment model;
its core premise fosters the exploitation of gig-economy workers.
357
Although
346
. Id.
347
. See id. (discussing the ease of implementing a break period in the Uber App).
348
. Hiba Hafiz, Structural Labor Rights, 119 MICH. L. REV. 651, 655 (2021).
349
. Id.
350
. Id.
351
. Johnathan Grossman, Fair Labor Standards Act of 1938: Maximum Struggle for a Minimum Wage,
DEP’T LAB., https://www.dol.gov/general/aboutdol/history/flsa1938# (last visited Jan. 9, 2022) (on file with the
University of the Pacific Law Review); see Franklin D. Roosevelt, Fireside Chat, AM. PRESIDENCY PROJECT (June
24, 1938), https://www.presidency.ucsb.edu/documents/fireside-chat-14 (on file with the University of the Pacific
Law Review) (“Do not let any calamity-howling executive with an income of $1,000 a day . . . tell you . . . that a
wage of $11 a week is going to have a disastrous effect on all American industry.”).
352
. Roy Cellan-Jones, Tech Tent: The End of the Gig Economy?, BBC (Sept. 13, 2019),
https://www.bbc.com/news/uk-49688742 (on file with the University of the Pacific Law Review); CAL. BUS. &
PROF. CODE § 7449 (West 2022).
353
. Bellon & Hussain, supra note 104.
354
. Bellon & Hussain, supra note 104.
355
. Arindrajit Dube, No, a $15 Minimum Wage Won’t Cost 1.4 Million Jobs, WASH. POST (Feb. 24, 2021),
https://www.washingtonpost.com/outlook/2021/02/24/minimum-wage-economic-research-job-loss/ (on file with
the University of the Pacific Law Review); Bellon & Hussain, supra note 105.
356
. Kris Broda, Gig Economy—The Backbone of the Future?, BRODMIN (Dec. 28, 2021),
https://brodmin.com/case-studies/gig-economy-case-study/ (on file with the University of the Pacific Law
Review).
357
. Mollaneda, supra note 20.
The University of the Pacific Law Review / Vol. 54
115
employment costs do place a burden on businesses, it is a necessary cost to ensure
a healthy society and strong economy.
358
When employers do not take care of their
employees, that burden falls upon the state to the detriment of the public.
359
Prop
22 allowed TNCs to exploit drivers through independent contractor
misclassification; thus, the new law cannot stand.
360
358
. David Madland, The Middle Class Grows the Economy, Not the Rich, CAP (Dec. 7, 2011),
https://www.americanprogress.org/article/the-middle-class-grows-the-economy-not-the-rich-2/ (on file with the
University of the Pacific Law Review).
359
. Horan, supra note 102, at 49.
360
. Mollaneda, supra note 20.
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