California voters overwhelmingly approved Proposition 22 on election day after an aggressive record-setting $204 million campaign bankrolled by Uber, Lyft and other app-based companies.

Nearly six in 10 voters favored the measure that allows these companies to classify drivers as independent contractors, denying them benefits, such as overtime, paid sick days and even minimum wage.

Companies agree to provide “some” benefits

Prop 22’s passage allows companies to exclude drivers from AB 5, passed last year by the state legislature. The law attempted to force Uber, Lyft and others to classify drivers as full-time employees when their roles were in the “usual course” of a company’s business.

Instead, as part of Prop 22, companies promise drivers a “guaranteed minimum pay rate” while they’re assigned to a ride, health stipends if they work a certain number of hours and a system for reviewing terminations.

However, a UC-Berkeley study concludes those guarantees are worth less than $6 per hour. The measure also places restrictions on legislators over regulating gig companies and requires the legislature to have a seven-eights supermajority to make any changes.

Immediate effects

Prop 22’s passage also neutralizes a recent court order that required Uber, Lyft and others to reclassify drivers as employees, in compliance with AB 5. The more than $200 million media blitz appears to have paid off in droves for the companies as the two ride-sharing giants’ value increased by $10 billion after the vote.

The campaign’s success will likely lead to these companies seeking similar laws in other states. In addition, DoorDash CEO Tony Xu says his company will attempt to create new benefits packages with its drivers that are “portable, flexible and proportional.” Some companies express a willingness to work with unions over benefits for gig workers.

Possible impacts of the incoming Biden administration

Legislation protecting gig workers likely hinges on the outcome of the two Georgia U.S. Senate runoff elections. If the Senate remains in Republican control, there is little hope of achieving a federal law similar to California’s AB 5.

However, President-elect Biden has pledged to strengthen worker protections, and some speculate that he could use executive powers to declare that gig workers already meet the definition of employees. If that happens, drivers and others could potentially sue for overtime and minimum wage violations, and the National Labor Relations Board could grant requests for union elections for those workers.