Uber and Lyft can continue classifying their drivers as independent contractors rather than employees after a recent court ruling.
The California Supreme Court upheld a 2020 voter-approved measure, marking a big win for ride-hailing companies.
The companies had warned of potential service reductions or cancellations in California if they were required to treat drivers as employees with additional benefits.
The court’s decision came in response to a lawsuit filed by the Service Employees International Union (SEIU) and four drivers, who challenged the constitutionality of Proposition 22.
Uber said the ruling upheld “the will of the nearly 10 million Californians who voted to deliver historic benefits and protections to drivers while protecting their independence.”
SEIU California’s executive director, Tia Orr, said the union was disappointed by the ruling.
She said gig workers can continue fighting for improved rights and protections, including unionizing efforts.
Classifying gig workers as employees or independent contractors is a critical issue for the ride-service industry.
Employees are entitled to benefits such as minimum wage, overtime pay, and expense reimbursements, whereas independent contractors do not receive these protections.
Studies suggest classifying workers as independent contractors can reduce company costs by up to 30 percent.
Prop 22, which passed nearly 60 percent of the vote in November 2020, allows app-based transportation services to classify drivers as independent contractors.
It’s provided they earn at least 120 percent of the minimum wage while driving and receive expense reimbursements and health insurance subsidies.
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A previous appeals court had rejected SEIU’s argument that Prop 22 infringed on the legislature’s power to regulate workers’ compensation systems by denying drivers these benefits.
The California Supreme Court’s ruling agrees with this stance.
The issue of gig worker classification extends beyond California.
In Minnesota, a new measure sets minimum wages for gig drivers.
Uber and Lyft agreed to a $32.50 hourly minimum wage for Massachusetts drivers and settled a lawsuit for $175 million.
Additionally, a proposal for driver unionization will be on Massachusetts’ ballot this November.
