A US court has ruled “gig” economy behemoths such as Uber and Lyft can continue to treat their employees as independent contractors.
The lawsuit was launched over Proposition 22 by labor groups and some workers, who claimed it deprived them of rights such as sick leave.
But the California Court of Appeal ruled that Proposition 22, a labor measure, was mostly constitutional.
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According to the firms, the proposition protects other benefits like flexibility.
The latest decision overturns a ruling made by a lower court in California in 2021, which found that Proposition 22 interfered with lawmakers’ ability to set workplace standards.
The state of California, as well as a group representing Uber, Lyft, and other companies, filed an appeal.
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A three-judge panel of the appeals court ruled on Monday that employees could be treated as independent contractors.
However, it removed a provision from Proposition 22 that restricted worker collective bargaining.
After-hours trading saw shares of Uber and Lyft rise nearly five percent.
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Tony West, chief legal officer at Uber said: “Today’s ruling is a victory for app-based workers and millions of Californians who voted for Prop 22,”
Mr. West said: “We’re pleased that the court respected the will of the people and that Prop 22 will remain in place, preserving independence for drivers.”
Lyft said that the proposition “protects the independence drivers value and gives them new, historic benefits.”
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The Service Employees International Union, which had challenged Proposition 22’s constitutionality with several drivers, said it was considering appealing the court’s decision.
California voters approved Proposition 22 in November 2020, allowing freelance workers to be classified as independent contractors.
It was a victory for Uber and Lyft, which spent $205 million (£168.7 million) to support the bill.
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However, the victory came with some conditions, and businesses were required to provide workers with benefits such as healthcare and accident insurance.
Some drivers supported Proposition 22, but others, including labor groups, opposed it, citing all the benefits of being classified as an employee, such as sick days, leave, and overtime pay.
Tens of millions of people work in the global gig economy, which includes services such as food delivery and transportation.
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Gig workers are paid for specific tasks such as food delivery or car rides rather than a regular wage.
Most federal and state labor laws in the United States, such as those mandating a minimum wage or overtime pay, do not apply to gig workers.
Firms like Uber and Lyft have come under increased inspection as the industry grows.
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