California’s Supreme Court on Thursday upheld a voter-approved measure that allows app-based services such as Uber and Lyft to treat drivers in the most populous state as independent contractors rather than employees entitled to more benefits.
The California Supreme Court’s decision is a major victory for the ride-hailing industry, which has argued that many companies would stop or limit their service in the state if they were forced to treat thousands of drivers as employees.
The court dismissed a lawsuit brought by the Service Employees International Union and four drivers who argued that Proposition 22, a 2020 ballot measure that would have granted drivers certain benefits while maintaining their contractor status, is unconstitutional.
Uber said in a statement that the ruling upheld “the will of nearly 10 million Californians who voted to give drivers historic benefits and protections while protecting their independence.”
SEIU California Executive Director Tia Orr said the union is disappointed with the ruling, but that rideshare drivers can continue to fight for their rights by seeking to unionize.
“Gig workers are determined to ensure fairness in the gig economy and will not stop fighting to win greater rights and protections in the workplace,” she said.
Whether gig workers should be treated as employees or contractors is a key issue for the ride-hailing industry: Employees are entitled to minimum wage, overtime pay, expense reimbursement and other protections, but those rights do not extend to independent contractors, who can cut companies’ costs by up to 30%, according to some studies.
Uber, Lyft and other app-based services spent more than $200 million campaigning to pass Proposition 22, which would allow drivers to continue earning an income while enjoying the flexibility of part-time gig work.
Proposition 22, passed in California in November 2020 by about 60% of voters, allows app-based transportation services to classify drivers as independent contractors if they are paid at least 120% of the minimum wage and provide subsidies to reimburse expenses and pay for health insurance while passengers are in the vehicle.
Whether gig workers should be treated as employees or contractors is a key issue for the ride-hailing industry: Employees are entitled to minimum wage, overtime pay, expense reimbursement and other protections, but those rights do not extend to independent contractors, who can cut companies’ costs by up to 30%, according to some studies.
Uber, Lyft and other app-based services spent more than $200 million campaigning to pass Proposition 22, which would allow drivers to continue earning an income while enjoying the flexibility of part-time gig work.
Proposition 22, passed in California in November 2020 by about 60% of voters, allows app-based transportation services to classify drivers as independent contractors if they are paid at least 120% of the minimum wage and provide subsidies to reimburse expenses and pay for health insurance while passengers are in the vehicle.
A state appeals court last year rejected SEIU’s argument that Proposition 22 unfairly limits the Legislature’s exclusive power to regulate the state’s workers’ compensation system by barring app-based drivers from receiving benefits that are only available to employees. The California Supreme Court agreed on Thursday.
California is just one frontline in a nationwide legal battle over the classification of gig drivers and other contract workers.
The Minnesota Legislature passed a bill in May setting a minimum wage for gig drivers at $1.28 a mile and 31 cents a minute, replacing a higher minimum wage adopted by Minneapolis, prompting Uber and Lyft to threaten to stop operating in the city.
Uber and Lyft agreed in June to set a $32.50 minimum hourly wage for Massachusetts drivers and pay $175 million to settle a lawsuit against the state for treating them as independent contractors. A proposition allowing app-based drivers to unionize is set to go before state voters in November.
