Rideshare companies rejoiced Thursday after the California Supreme Court upheld proposition 22, allowing app-based services such as Uber and Lyft to classify their drivers as independent contractors rather than employees.
Proposition 22 is a ballot measure passed by voters in November 2020 that allows app-based companies like Uber and Lyft to classify their drivers as independent contractors rather than employees.
The court’s decision overturns a lawsuit that questioned the constitutionality of the measure. Reuters reports that the Service Employees International Union (SEIU) and four ride-hail drivers argued that Prop 22 improperly limited legislative power over California’s workers’ compensation system. However, a state appeals court had previously rejected this claim, and the Supreme Court ultimately concurred with the lower court’s decision.
“We are thrilled that the California Supreme Court unanimously upheld the democratic will of the voters and did what’s right for California’s communities and economy,” Lyft published in a statement. “Prop. 22 was overwhelmingly passed by nearly 10 million California voters, and the effort to pass it was supported by more than 120,000 drivers and 140 community groups and organizations.”
In a separate statement published by Uber, the rideshare giant praised the ruling as an affirmation of “the will of nearly 10 million Californians who voted to deliver historic benefits and protections to drivers while protecting their independence.”
Uber insisted that enforcing employee status would have forced many companies to reduce or terminate their services in the state. Experts also cited that it would be a key decision in how the country approaches workers in the gig economy.
The ruling maintains a mixed status for drivers. Tech Crunch reports that it allows them to remain classified as independent contractors while receiving some benefits traditionally only offered to full-time employees.
Under Prop 22 drivers are entitled to a pay rate of at least 120% of the minimum wage while actively driving passengers and can also receive reimbursements for certain expenses and subsidies for health insurance.
This decision carries broad implications for the gig economy and labor rights as similar legal and legislative challenges unfold across the United States. For instance, in Minnesota, a law setting minimum wages for gig drivers at $1.28 per mile and 31 cents per minute replaced a higher minimum wage in Minneapolis — prompting Uber and Lyft to threaten to cease operations in the city.
In another case, Uber and Lyft recently agreed to a $32.50 hourly minimum wage for drivers in Massachusetts and settled a lawsuit for $175 million over claims of misclassification. Massachusetts voters will also decide in November on a proposal that could pave the way for gig drivers to unionize.
Ride share companies, which have traditionally benefited from the legal status of gig workers, but have come under fire in recent months with a slew of court cases and legislation in Europe, the U.K., Australia, in addition to state cases in the U.S.
The California Supreme Court’s decision to uphold Proposition 22 strengthens the position of ride-sharing companies like Uber and Lyft and strengthens the argument for similar measures in other states, affecting how gig workers are classified and compensated nationwide.
