California Supreme Court Upholds Prop 22, Cementing Gig Worker Classification
The California Supreme Court recently made a significant ruling, declaring that Proposition 22 (Prop 22), the ballot measure passed in November 2020, will remain in effect. Prop 22 classifies app-based gig workers as independent contractors rather than employees. This decision is a major victory for companies like Uber, Lyft, DoorDash, and Instacart, which heavily rely on gig workers for their on-demand services.
Uber expressed its satisfaction with the ruling, stating that it solidifies the freedom of drivers and couriers to work as they please. Lyft echoed a similar sentiment, highlighting that over 80% of surveyed California drivers believe that Prop 22 has been beneficial for them. This ruling puts an end to the ongoing legal battles regarding gig worker classifications in California, although opponents of Prop 22 can still petition the court for a reexamination.
Prop 22 was introduced as a response to Assembly Bill 5, a state law that would have required companies to classify gig workers as employees, granting them various benefits such as minimum wage and workers’ compensation. To promote the measure, these app-based companies spent more than $200 million on advertising to convince drivers and voters of its advantages.
The core of these companies’ business models lies in their ability to avoid providing benefits such as health insurance and sick leave to their workers. By classifying gig workers as independent contractors, they can maintain the flexibility and low capital expenditures associated with their asset-light models. Prop 22 aimed to strike a balance between providing workers with some benefits while still keeping them as contractors. The measure entitles workers to earn 120% of the state minimum wage for hours worked, along with an additional 30 cents per engaged mile. However, critics argue that this minimum wage only applies when a worker is actively engaged, leaving out time spent waiting for gigs, which is an essential aspect of the companies’ on-demand service.
Moreover, Prop 22 does offer healthcare subsidies to drivers who meet certain weekly hour requirements, but drivers have found it challenging to qualify for these subsidies. The ruling has drawn criticism from labor rights activists, such as Sergio Avedian, who believes that the companies will use this minimum wage guarantee to keep driver fares at the lowest legally required level.
While this ruling affects California, similar battles between gig workers and app-based companies are taking place in other states. In Massachusetts, Uber and Lyft agreed to a $32.50 hourly minimum pay standard for drivers and settled a lawsuit alleging misclassification of drivers as independent contractors. In New York City, app-based companies must pay delivery workers $19.56 per hour for time spent on the app, not just during active deliveries.
This recent ruling sets a precedent for the classification of gig workers in California and may influence discussions and legislation in other states. The gig economy continues to be a subject of debate, with concerns over worker rights and the impact on consumers.
