Proponents of Proposition 22 have flooded TV airwaves with ads warning against the loss of jobs if Prop 22 does not pass. Prop 22 is a ballot measure called the “App-Based Driver Protection Act” that would treat app-based drivers as independent contractors instead of employees. The net effect of Prop 22 would be to override California Assembly Bill 5 (CA AB5), which was signed into law last year, and created a presumption that a worker is an employee instead of an independent contractor unless the “employer” can prove each of the elements of the “ABC” test.
Among what is not mentioned in these TV ads is Prop 22’s requirement to provide a subsidy for healthcare benefits to app-based workers. Under the ACA’s Employer Mandate, employers are required to offer healthcare coverage to their full-time employees or else face significant IRS penalties. This Employer Mandate requirement does not apply to independent contractors.
In apparent recognition, Prop 22 provides a separate structure for “employers” to provide a healthcare coverage benefit to their app-based workers. While not required to offer healthcare coverage, the “employer” must provide a quarterly subsidy that is “consistent with the average contributions required under the [ACA]” to their app-based workers.
The structure by which workers get the subsidy is different from that required for employees under the Employer Mandate. The amount of the subsidy depends on the average hours of service of the worker per quarter: (a) 100% of the average ACA contribution for the applicable average monthly Covered California (California’s ACA healthcare exchange) premium for each month in the quarter for those workers who average 25 hours or more in a calendar quarter and (b) 50% for those workers who average 15 to less than 25 hours in a calendar quarter.
Additionally, there are certain reporting requirements the “employer” must furnish to the app-based worker at the end of each earnings period. This includes (1) the number of hours of engaged time the app-based driver accrued on the “employer’s” online-enabled application or platform during that earnings period, and (2) the number of hours of engaged time the app-based driver has accrued on the “employer’s” online-enabled application or platform during the current calendar quarter up to that point.