California Supreme Court Upholds Proposition 22, Securing Independent Contractor Status for Uber and Lyft Drivers

In a significant win for the ride-hailing industry, the California Supreme Court on Thursday upheld Proposition 22, a measure approved by voters allowing app-based services such as Uber and Lyft to classify drivers as independent contractors rather than employees entitled to greater benefits.

According to Reuters, the ruling comes as a relief to the ride-hailing giants, which had warned that reclassifying drivers as employees would force them to end or severely limit their services in California. The court dismissed a lawsuit filed by the Service Employees International Union (SEIU) and four drivers, who argued that the 2020 ballot measure was unconstitutional.

Proposition 22, passed by nearly 60% of California voters in November 2020, maintains drivers’ status as independent contractors but grants them certain benefits. Under the measure, drivers must be paid at least 120% of the minimum wage while transporting passengers and receive reimbursements for expenses and subsidies for health insurance.

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The distinction between employees and independent contractors is critical for the gig economy. Employees are entitled to minimum wage, overtime pay, expense reimbursements and other protections not extended to independent contractors, who can cost companies up to 30% less, according to various studies.

Uber, Lyft, and other app-based services spent over $200 million on a campaign to pass Prop 22, emphasizing that it allows drivers to earn money while enjoying the flexibility of part-time gig work. The companies argued that many drivers prefer the autonomy of being independent contractors, which enables them to set their own schedules.

The court’s decision solidifies a major victory for the ride-hailing industry, allowing it to continue its operations under the current model without the financial burden of reclassifying thousands of drivers as employees.

Source: Reuters