The new COVID-19 stimulus package signed into law allows states to waive attempts to collect excessive PUA payments as long as workers meet two requirements:

1. Their original PUA application was filed in good faith
2. Repaying the state would result in financial hardship

Confusion existed over initial applications

Under the March 2020 coronavirus relief bill, thousands of gig workers reported their total earnings to the Employment Development Department (EDD), which oversees the state’s PUA. However, they were supposed to report how much they made after deducting expenses.

That led to thousands of workers receiving more aid than they should have gotten – some up to $10,000 more. Once the errors became evident, the EDD later tried to get the overpayments back by asking workers to verify their net incomes. Under the initial relief bill, states could not waive efforts to collect overpayment amounts. But that changes under the current extension.

Waivers are typically granted during recessions

The National Employment Law Project says state agencies generally approve waivers in these cases. Californians who receive a notice of overpayment can file for the waiver by completing a Personal Financial Statement verifying their income.

Mistakes often happen during economic emergencies, and in this case, vague language in the original PUA led to a widespread misunderstanding. The Law Project says the EDD has shown compassion in the past and approved waivers in most cases, especially if repayment causes economic hardship.

Aid extended through March 2021

The newly-signed aid bill essentially extends the PUA through at least March 21, which means nothing has changed. However, gig workers and independent contractors who file for aid should report their “net” income, meaning the amount they receive after deducting expenses.

Some gig workers may qualify for unemployment benefits

The passage of Proposition 22 redefines gig workers as independent contractors – affecting hundreds of thousands of Uber and Lyft drivers as well as those working for app-based delivery services. However, prior to that measure taking effect in mid-December, many of those workers were classified as employees under Assembly Bill 5.

Groups representing gig workers urge those individuals to file for regular unemployment benefits, which could mean thousands of dollars more in payments compared to the PUA. Under AB 5, most of these workers were entitled to receive benefits, including unemployment insurance, for the past 18 months before Prop. 22 went into effect.

According to court records, roughly 1,630 employees will receive an average payment of $12,000 as part of the settlement. California workers are included under a second class-action suit filed against the company.

A nine-year court battle erupted over worker classifications

Hundreds of workers classified as assistant managers (ASM) say the company directed them to do non-managerial tasks identical to those performed by non-exempt employees, forcing them to work extra hours for no pay. These duties included:

• Loading and unloading trucks
• Stocking store shelves
• Assisting customers
• Janitorial work

The first lawsuit was filed in June 2011, charging Burlington with wrongly classifying these workers as ASMs to exempt them from overtime requirements.

Financial stress likely led to settlement

Like many other retailers, 2020 was a rough year for Burlington, which reported a loss of $333 million during the first nine months of the year. During the same period in 2019, the chain reported nearly $280 million in earnings.

The company has 730 stores across the country and reported total sales during that same nine-month period dropped by more than $1.5 billion during 2020. Despite the economic turmoil, the U.S. magistrate overseeing the settlement says the deal was hard-fought during mediation.

Worker misclassification is a common issue in California

Employers routinely misclassify their workers, whether they are full-time employees or independent contractors, to avoid paying overtime and offering other benefits, such as health care, sick leave, unemployment insurance and meal breaks.

California has some of the most stringent worker protections in the country. Employees are presumed to be non-exempt workers unless an employer can prove they are exempt or independent contractors. If you believe you have been misclassified, working with an aggressive wage law attorney can help you receive the pay and benefits you are entitled to receive.

The measure sought to free these companies from providing benefits to their workers, such as overtime, unemployment and sick leave. However, the fight over protections for these workers is likely to persist.

Companies still face challenges

Even in the wake of a comfortable Election Day win, many of these app-based companies, which spent hundreds of millions of dollars in support of Prop. 22, face old and new hurdles, including:

• Previous legal challenges: Three unresolved lawsuits brought by the state attorney general, state labor commissioner and three city attorneys accuse these companies of illegally classifying their workers as contractors. Even though Prop. 22 passed, companies face potential repercussions for how they treated workers before the law went into effect on Dec. 17.
• Constitutional challenge: Employee advocate National Employment Law Project may challenge a requirement that any future changes to the law must have a seven-eighths legislative majority. The group contends that is too restrictive for regulating collective bargaining agreements.
• Biden administration: Under the Trump administration, the National Labor Relations Board deems gig workers as contractors, and the U.S. Labor Department has followed suit. However, that could change under President-elect Biden. Biden opposed Prop. 22 and also supports the PRO Act, which would make it more difficult for companies to misclassify gig workers, who would also receive federal labor protections they now lack.

The future remains unclear for gig workers

It is not certain how labor laws and protections for gig workers will evolve under the Biden administration. However, the state will continue to try to hold these companies accountable for past violations.

Uber and Lyft say they are open to collective bargaining over benefits for drivers. Groups representing drivers say they will continue to keep fighting for benefits and protections, so app-based employees are treated equally with other workers.

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.

The ruling affirms state court actions and legislators’ beliefs that gig workers do not have the independence necessary to be considered independent contractors.

Ruling decides lawsuit, but voters may have a say

The appeals court ruled in favor of a lawsuit filed in May by the state’s attorney general and the cities of Los Angeles, San Diego and San Francisco, forcing ride-hailing companies to comply with a new state labor law designed to protect gig workers as employees.

After a lower court ruled against the companies, Uber and Lyft appealed, allowing them – at least temporarily – to not comply with an order to hire drivers as employees immediately. The companies are now considering creating franchises in the state to avoid directly hiring drivers.

All parties await the outcome of a ballot measure, mostly written and paid for by app-based transportation and delivery companies allowing them to classify drivers as contractors, to avoid paying employee benefits. Voters will decide the fate of Proposition 22 on Nov. 3.

Independent contractors vs. regular employees

An estimated 53 million California workers are independent contractors, but many of them have been misclassified. To be legally considered an independent contractor, workers have unique characteristics such as:

• Be in business for themselves
• Decide where and when they work
• Set their own pay rates
• Work with multiple clients
• Provide their own equipment and materials
• Have skills or expertise that a company’s employees don’t have

Independent contractors must essentially be their own bosses. But despite having greater flexibility, they don’t have the same rights as regular employees. They aren’t entitled to overtime pay or even the minimum wage, are ineligible for health and unemployment benefits and aren’t protected by state and federal discrimination laws.

Fight for the pay and benefits you deserve

Many employers classify workers as independent contractors just to avoid the costs associated with regular employees. If you believe you have been wrongly classified, an experienced employment attorney can help you recover back pay, overtime and other benefits that you deserve.

Your lawyer can help you file a claim with the California labor commissioner. You may also be able to pursue a discrimination or retaliation complaint if a company takes adverse actions against you for seeking the compensation and rights afforded to you under the law.

Ride-sharing and delivery companies, including Lyft, Uber, and DoorDash, paid millions of dollars to put Prop 22 on the ballot. Their lawyers wrote this misleading initiative, and the companies paid political operatives to collect voter signatures to put it on the ballot.

How does Prop 22 hurt drivers?

Between 800,000 and 950,000 Californians provide rides or make deliveries for these companies every year. Drivers have the flexibility to work when and where they want but use their own cars and cover those costs.

Drivers can work full-time or part-time, and make, on average, $11 to $16 per hour. If Prop 22 is approved, these companies can reclassify drivers as independent contractors, thereby denying employees basic protections. Their only goal is maximizing profits.

Like every other business under current California employment laws, Uber, Lyft, and DoorDash must pay drivers at least minimum wage, and provide benefits, such as healthcare, paid sick leave, unemployment, and workers’ compensation coverage.

In May, California Attorney General Xavier Becerra sued these companies for violating the state’s AB5 law, which went into effect on Jan. 1 of this year. The law determines whether a worker can be classified as a contractor or an employee.

Prop 22 contains deceptive wording

The proposition is filled with misleading language to convince voters that approving the measure will strengthen driver rights and protections. In reality, Uber and Lyft must currently conduct background checks while the new provisions would actually eliminate sexual harassment training already in place.

Plus, Uber and Lyft would no longer be required to investigate customer and driver claims over sexual harassment. Instead, these protections are replaced with a reduced “earnings guarantee” and a “healthcare subsidy,” which would save the companies money. Furthermore, Prop 22 prevents cities and counties from setting and enforcing local rules, such as establishing a higher minimum wage.

COVID-19 places drivers at greater risk

The ballot measure comes at a time when the COVID-19 pandemic is still raging out of control, and these companies continue to put their drivers in jeopardy by refusing to implement adequate safety measures.

A recent New York Times editorial stated Uber, Lyft, and others do not have consistent policies providing sufficient numbers of masks or social distancing guidelines. Meantime, they push their drivers to fulfill the demand for increased food delivery orders.

Prop 22 targets workers of color

Ride-sharing and food deliveries have proven to be essential services during the pandemic, and nearly four out of five drivers are people of color. App-based drivers from the Black, Latinx or other communities deserve better as their efforts have been vital to all of us living through the pandemic. Just like everyone else, app-based drivers should have access to sick leave, healthcare and unemployment benefits.

Reality contradicts proponents’ claims

Don’t allow Uber, Lyft, and other companies to deceive you. They claim this measure would benefit part-time drivers by giving them greater flexibility. However, current laws in no way limit driver schedules. Additionally, a University of California study found that 70% of Uber and Lyft drivers work 30 hours per week or more, making them full-time employees. These companies are only concerned about the flexibility to increase their profits. Vote “NO” on Proposition 22.

Non-exempt workers are typically paid by the hour, qualifying for overtime, meal breaks and rest periods. Exempt employees are not entitled to the same benefits guaranteed under the Fair Labor Standards Act (FLSA) and California laws.

Who is exempt?

As of Jan. 1, 2020, the minimum annual salary for exempt workers is $54,080 for companies with 26 or more employees. For those with 25 or fewer employees, the minimum is $49,920. Those figures will continue to rise through 2023 due to planned increases in the state’s minimum wage. But, exemptions also depend upon the type of job a worker performs. These include:

• Executives
• Administrators
• Professionals
• Independent contractors
• Outside salespeople

However, persons with these types of job titles or descriptions are not automatically exempt. Likewise, workers paid an annual salary cannot necessarily be excluded from OT and other benefits.

California exempt employee criteria

Three basic requirements exist when determining whether a worker qualifies for exempt status:

• Employees whose duties focus on professional, administrative or executive functions for 50% or more of their hours worked
• In addition, they make independent work decisions using their discretion
• They meet the minimum annual salary requirement

Taking action against employers who misclassify workers

Employers who violate California and federal labor laws over classifying employees usually do so for financial gain. Employees may be confused over whether they have been misclassified. If you are unsure, contact an experienced wage and hour attorney, who will examine your work status. Companies face significant penalties, including back pay, overtime and compensation for missed meal and rest breaks.