Minnesota Gov. Tim Walz has said he will sign into law a bill that ends the threat of Uber and Lyft leaving the Twin Cities area and sets statewide compensation rates for ride-hailing services.
Meanwhile, arguments in the California Supreme Court’s review of Proposition 22, which aims to protect gig workers from the state’s AB5 law, suggest the voter-approved initiative may stand, exempting companies like Uber and Lyft from AB5’s strict limits on who can be classified as an independent contractor.
The trucking industry is appealing a federal judge’s rejection of its latest attempt to keep AB5 out of the trucking sector, which has no carve-out similar to the one Prop 22 gave to gig workers.
In Minnesota, Walz announced a deal with lawmakers over the weekend that he said would give drivers statewide a 20% raise from current compensation levels, which are not set by law.
News reports quoted spokesmen for both Uber and Lyft as saying they would continue to operate in the state as a result of the provisions in the new law.
Previous passage of a local measure had led the two companies to threaten to cease operations in the Minneapolis area — not just the city itself — if they took effect. An agreement pushed the effective date back to July, giving the city and the state time to hammer out a compromise.
In an article for the Minnesota Reformer, a nonprofit news service, writer Max Nesterak analyzed not only previous state legislation but various proposals in the Minneapolis City Council to guarantee drivers minimum compensation.
According to the analysis, the per-mile rate under the city ordinance would have been set at $1.40 plus a 51-cents-per-minute charge. The analysis said hourly take-home pay after expenses and taxes would have been $28.35, with pre-expense earnings at $43.73.
Mayor Jacob Frey vetoed the first Minneapolis ordinance setting the rates but was overridden in March. His compromise proposal called for $1.20 per mile and 35 cents per minute, for pre-expense compensation of $34.47 an hour and post-expense compensation of $19.80 an hour.
The news service said the final agreement in the state law calls for minimum compensation of $1.28 per mile and 31 cents per minute, yielding pre-expense average compensation of $34.58 an hour and post-expense compensation of $19.89 an hour.
Nesterak’s analysis said the minimum rates per trip are not guaranteed every time a driver carries a passenger.
“Rather, drivers must be paid the minimum rates on average over a two-week pay period,” he wrote. “If drivers’ earnings average out below the wage floor over a given pay period, the companies must top them off with the difference. That was an important provision for Uber and Lyft because it gives them wide latitude in setting pay and price according to rider demand.”
Meanwhile, in California, reports from the state Supreme Court said arguments made by the justices Tuesday in the Prop 22 case appeared to favor Uber, Lyft and similar services.
The case, Castellanos et al. vs. California et al., traces back to California voters’ approval on Election Day 2020 of Prop 22, a referendum that prohibited enforcement of the state’s AB5 independent contractor law on gig drivers for companies such as Uber and Lyft.
A lower court in 2021 overturned the results of Prop 22 on the grounds that it conflicted with the state’s workers’ compensation laws and the issue of whether a referendum can alter laws enacted by the state Legislature. Prop 22 removed gig workers from the workers’ comp program, which opponents jumped on in their post-Election Day legal battle.
An appellate court overturned that lower court decision. The state appealed to the California Supreme Court, the court accepted the review request, and oral arguments were heard Tuesday.
In an article in CalMatters, a nonprofit news agency, writer Levi Sumagaysay summarized the day’s events in a subheadline: “California Supreme Court justices appear poised to uphold Prop. 22, a voter-backed initiative passed in 2020.”
Worker’s comp is the issue in the Prop 22 fight
The fact that the issue at hand is control over workers’ compensation has been obscured by the passions that have been part of the AB5 debate since its passage in 2019.
As the state said in a brief filed with the court earlier this month, California concedes that “the amicus briefs on both sides of this case mostly debate whether Proposition 22 is good or bad policy. But that debate has no bearing on the correct answer to the legal issue presented by this Court when it granted review.”
The CalMatters review of the court proceedings summed up the legal issue involved in the worker’s compensation debate:
“Associate Justice Goodwin Liu said there is ‘still ambiguity there’ over voter initiative power, which is supposed to be equal to legislative power: ‘Does that mean voters cannot act in this field, (workers’ comp), whatsoever?’
“[Scott Kronland, the lawyer who argued on behalf of Service Employees International Union California] responded that the Legislature’s power over workers’ comp is unlimited.
“Attorney Jeffrey Fisher, arguing on behalf of the gig companies, said ‘the constitution lets voters act on any subject.’ That sparked a question from Associate Justice Leondra Kruger: ‘Could voters by initiative eliminate workers’ comp altogether?’
“Fisher said yes, but that ‘we’re miles away from that.’”
Sumagaysay wrote that “based on their line of questioning, California Supreme Court justices seemed to be reaching for a compromise … in the long-running legal saga over whether gig workers should be considered independent contractors or employees.”
AB5 was approved by the Legislature and signed into law by Gov. Gavin Newsom in 2019. At its heart is the ABC test, which defines a worker as truly independent if the worker meets three tests.
For both truckers and gig workers, the B prong has been the one of the three that creates the most potential problems: “The worker performs work that is outside the usual course of the hiring entity’s business.” Given that the core of Uber’s and Lyft’s business is moving people from point to point, and for trucking it is moving freight from point to point, having non-employees perform those functions could create friction with the B prong.
The lengthy history of trucking trying to keep AB5 out of its industry has had its ups and downs, but as of now, the law is in effect even as more legal proceedings are underway.
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