A Step by Step Guide for Prop 22 Payments

The "App-Based Drivers as Contractors and Labor Policies Initiative," or Prop 22, passed in November 2020 in California and altered the classification of app-based transportation and delivery drivers to independent contractors, absolving companies like Uber and Lyft from providing traditional employee benefits.

However, Prop 22 does require these companies to provide certain compensation and benefits to their drivers. In this blog post, we will provide a step-by-step guide for how to calculate and handle Prop 22 payments for contract workers.

Step 1: Determine the total number of hours worked by the driver. This can be done by reviewing the driver's app logs, GPS data, or other records.

Step 2: Multiply the total number of hours worked by the driver's hourly pay rate. This will give you the total amount of pay the driver is entitled to under Prop 22.

Step 3: Calculate the "minimum compensation amount" (MCA) for the driver. The MCA is a minimum amount of compensation that the company must pay to the driver, regardless of the number of hours worked. The MCA is currently set at 120% of the state minimum wage, with an additional 30 cents per hour for expenses. For example, if the state minimum wage is $13 per hour, the MCA would be $15.60 per hour.

Step 4: Compare the total pay calculated in step 2 to the MCA calculated in step 3. If the total pay is less than the MCA, the company must pay the driver the difference.

Step 5: Calculate the "health care subsidy" for the driver. The health care subsidy is a monthly payment that the company must make to help cover the cost of the driver's health insurance. The amount of the subsidy is based on the number of hours the driver worked in the previous month.

Step 6: Pay the driver the total pay calculated in step 2, any additional pay required under step 4, and the health care subsidy calculated in step 5.

It is important to note that Prop 22 is a new law and the regulations are still being developed. The above steps may change as the state continues to implement the law. It is always recommended to consult with legal professionals and stay up-to-date with any changes to the law.
Prop 22 changes the way companies must handle payments for contract workers. By following these steps, companies can ensure that they are complying with the law and providing the appropriate compensation and benefits to their drivers. Want to automate the calculation of Prop 22 payments? Contact Us!