Uber, Lyft Can Continue Treating Drivers as Contractors After Court Ruling in California

A state appeals court in California ruled that ride-hailing and delivery companies like Uber and Lyft can continue to classify their drivers in the state as independent contractors, according to a report by AP on Monday, March 13.

This decision allows these companies to bypass certain state laws that mandate worker protections and benefits.

Proposition 22

The ruling mostly upholds Proposition 22, a law that was approved by voters in 2020. Proposition 22 stated that drivers for companies like Uber and Lyft are independent contractors, and therefore not entitled to benefits like paid sick leave and unemployment insurance. A lower court declared Proposition 22 illegal in 2021, but the latest ruling has overturned that decision.

According to Uber's Chief Legal Officer, Tony West, the ruling is a victory for app-based workers and the millions of Californians who were in favor of Prop 22.

However, the ruling is a huge setback for labor unions and their allies in the state Legislature, who had passed a law in 2019 requiring companies like Uber and Lyft to treat their drivers as employees.

"Today the Appeals Court chose to stand with powerful corporations over working people, allowing companies to buy their way out of our state's labor laws and undermine our state constitution," Lorena Gonzalez Fletcher, leader of the California Labor Federation, said in a statement quoted by AP.

"Our system is broken. It would be an understatement to say we are disappointed by this decision."

Prop 22's History

In 2019, the California Legislature passed a law that changed the rules governing who is considered an employee and who is classified as an independent contractor.

This was particularly significant for app-based ride-hailing and delivery companies, as their business model relies heavily on contracting with independent drivers who use their own vehicles to provide services.

Under the new law, companies would have to treat these drivers as employees and provide them with benefits that would significantly increase their expenses.

However, in November 2020, California voters approved a ballot proposition that exempted app-based ride-hailing and delivery companies from the 2019 law. Proposition 22 provided drivers with "alternative benefits," including a guaranteed minimum wage and subsidies for health insurance if they worked for at least 25 hours per week.

Companies like Uber, Lyft, and DoorDash spent millions of dollars on the campaign to ensure its passage, according to AP.

While the recent court ruling may not be the final decision, as the Service Employees International Union could still appeal to the California Supreme Court, it provides clarity for companies that rely on independent contractors.

Although the ruling has allowed these companies to continue classifying their drivers as independent contractors, it also ensures that drivers have the right to organize and bargain collectively for better working conditions.