Will Prop 22 Change the Independent Contractor Model?

California’s Proposition 22 allows rideshare drivers (Lyft, Uber) to remain independent contractors. More than 70% of drivers said they wanted to keep the flexibility to work whenever they want.

However, the proposition includes benefits that most independent contractors don’t have. Under Prop 22, Uber and Lyft designed a hybrid model: freelance with benefits.

Here’s the gist of how driving for Lyft and/or Uber will change moving forward (this excerpted from an email I received from Lyft):

Now that Prop 22 has passed, drivers will maintain their independence and get important benefits, which include guaranteed earnings, new healthcare subsidies, and more extensive insurance coverage. These benefits increase with hours worked, and drivers can still earn whenever, however, and with any platform they want.

This new path combines the strengths of both contractor and employee models. Before now, benefits have traditionally been available only to employees — and just like with ridesharing, many people didn’t think a new way was possible. With 6:1 drivers wanting to have benefits and keep the flexibility of staying independent, we’re very happy they now have this…

I don’t drive for Lyft or Uber (I don’t like to drive myself places much less anyone else!). But for those who drive full time or a lot of the time, healthcare subsidies could be a welcome benefit. If you’ve ever had to pay for your own health insurance in California, you know what I mean! Even a catastrophic plan is unaffordable for most people.

Then again, maybe drivers would rather simply get a raise. About a week before the election, I asked a Lyft driver if he supported Prop 22 and what he thought. He was 100% for it, but he was frustrated because his per-mile rate would get cut from about 50 cents a mile to 30.

That driver may have misread some of Prop 22’s perks. The measure provides a net earnings floor of 120% of the minimum wage plus 30 cents per mile compensation for expenses.

According to analysis conducted by UC Riverside, a Lyft worker driving 5 hours a week would earn about $27 per hour. Healthcare subsidies kick in when someone drives at least 15 hours a week in a quarter. The subsidy ranges from 41 to 82% of a Covered California Bronze Plan. (For me, a healthy, nonsmoking individual, a Bronze plan with a $6,000+ deductible costs around $600 per month. No kidding.)

A New Freelance Model?

If Prop 22 and its hybrid model work out for Lyft, Uber, and the like, will other companies follow suit? For example, will the freelance newspaper columnist get some benefits from his publisher? Will freelancers be able to negotiate for healthcare subsidies as part of their agreements? Should they?

Share your thoughts in the comments below.

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