California Supreme Court Upholds Measure Allowing App-Based Services to Treat Drivers as Independent Contractors
In a significant win for the ride-hailing industry, the California Supreme Court upheld a measure that allows app-based services like Uber and Lyft to classify drivers as independent contractors rather than employees. This ruling comes after a lawsuit filed by the Service Employees International Union (SEIU) and four drivers, who claimed that the measure, known as Proposition 22, was unconstitutional. Prop 22, which was approved by nearly 60% of California voters in November 2020, preserves drivers’ contractor status while providing them with certain benefits.
The court’s decision to dismiss the lawsuit is a victory for Uber and Lyft, who argued that classifying drivers as employees would force them to limit or end their services in the state due to the increased costs associated with employee benefits. Uber issued a statement applauding the ruling, emphasizing that it aligns with the desires of the millions of Californians who voted for Prop 22 and supports the independence of drivers.
However, the SEIU expressed disappointment with the court’s decision and reiterated their commitment to fighting for gig workers’ rights. Tia Orr, the Executive Director of SEIU California, stated that rideshare drivers would continue to seek greater workplace protections and rights, including the option to unionize.
The classification of gig workers as employees or contractors has been a contentious issue in the ride-service industry. Employees are entitled to minimum wage, overtime pay, expense reimbursements, and other protections that independent contractors do not receive. According to numerous studies, companies can save up to 30% by classifying workers as contractors. This cost savings has driven app-based services to advocate for the contractor classification, as it allows drivers to maintain the flexibility of part-time gig work while still earning money.
Prop 22, backed by Uber, Lyft, and other app-based services, attracted significant financial support during the campaign leading up to the November 2020 vote. More than $200 million was spent to persuade voters to pass the measure, arguing that it provides benefits and protections to drivers while preserving their independence. The proposition allows app-based transportation services to consider drivers as independent contractors if they are paid at least 120% of the minimum wage while passengers are in the car. It also includes expense reimbursements and subsidies for health insurance.
This legal battle over the classification of gig workers extends beyond California. Minnesota recently passed a measure to establish a minimum wage for gig drivers, while Massachusetts reached a settlement with Uber and Lyft, requiring them to adopt an hourly minimum wage for drivers and pay a settlement fee. Furthermore, app-based drivers in Massachusetts may have the opportunity to unionize as a proposal is set to go before voters in November.
The California Supreme Court’s decision not only solidifies the classification of gig workers in the state but also highlights the ongoing debate surrounding worker rights in the gig economy. As the fight continues nationwide, it remains to be seen how other states will navigate the complex issue of gig worker classification and the balance between flexibility and worker protections.