Prop 22 has happened before. Approximately 30 years ago domestic referral agencies (the precursor to the app based gig economy) formed a coalition to legally exempt themselves from being designated as employers (AB1370). These housekeeping services were audited by the California EDD and were charged with misclassifying their cleaning technicians as independent contractors instead of employees. With their tax liability growing to over $2.5 million, they fought hard to have their business model receive special treatment. In 1994, they were ‘carved out’ of standard employer classification guidelines. To this day, this business structure allows them to avoid paying employment taxes, workers compensation insurance, provide paid time off, or savings plans as required by state law. They are not liable for any damage that may happen during a cleaning service. Referral services do not provide training of any kind, including how to work safely during a pandemic. All risk and responsibility falls upon the independent cleaner and the client.
On average, referral services collect 40% of the cleaning charge as their referral fee. This fee is used to promote their referral service, recruit new cleaners, and staff their appointment desk. None of this fee is used to support the cleaners besides finding more houses to clean. An unhappy client usually means the cleaners will not receive another booking through the referral service. They may use their referral fee to offer discounts and compensate unhappy clients. Referral services will claim they are lower cost than employee based services because they do not provide uniforms or transportation. In truth, they offer slightly lower fees because they do not pay employment taxes or contribute to employee protection measures.
There are certainly benefits to the referral system. These services certainly make it easy to find someone to clean a home and for some cleaners to find work. The service fees are often lower than what a cleaning business with employees might charge (because referral agencies don’t have to pay employment taxes). But these benefits come with some significant risks. During the pandemic, many housekeepers were let go or not called in to clean by their customers. These individuals did not qualify for unemployment insurance because they are considered independent contractors. Also, clients are at risk because a housekeeper could make a credible claim that they are the cleaner’s employer. If the cleaner is hurt at the client’s home, the client could be liable to cover medical care.
Some argue that the independent contractor model provides cleaners (or in today’s case drivers) the flexibility to work when they choose. In truth, a flexible model is possible with employees as well. Oranges & Lemons allows their team members to create their own schedule. They provide their hours of availability and we schedule work accordingly. Some of our team members work at other employers and use the flexibility our structure provides to enhance their income. Team members enjoy flexibility and employment protections. Is it a bit harder to manage? Sure it is. But we feel this provides our teams with the best working structure.
AB 1350 changed the working environment for many housekeepers over 30 years ago. Prop 22 has the potential to have a more profound effect on drivers as it is unlikely an employer based model will develop if it passes. We support all workers having basic protections and hope that all members of our community encourage businesses to protect their team members as well.