Court Grants Uber and Lyft Right to Classify Drivers as Contractors in California
Uber and Lyft can breathe a sigh of relief after an appeals court ruled that gig workers, including rideshare drivers, can continue to be classified as independent contractors under Proposition 22 in California. The ruling overturned a previous decision by a lower court that had found the proposition unconstitutional.
The dispute over worker classification in California began when the state passed Assembly Bill 5 in 2019, requiring gig economy companies to treat their workers as full-time employees with appropriate benefits and protections. Uber, Lyft, Instacart, and DoorDash responded by pouring over $220 million into the campaign for Proposition 22, which allows them to treat app-based workers as independent contractors.
In 2021, critics including the Service Employees International Union and the SEIU California State Council filed a lawsuit to overturn Proposition 22. The lower court judge agreed with them, ruling that the proposition was unconstitutional because it “limits the power of a future legislature to define app-based drivers as workers subject to workers’ compensation law.”
However, the appeals court judges have now overturned that decision, upholding Proposition 22. One judge did express concern about the proposition’s potential to limit the power of the legislature to define workers’ rights. Nonetheless, the court ruled in favor of the proposition, but ordered the severance of a clause that made it difficult for workers to unionize. The clause required a seven-eighths majority vote from the California legislature to amend workers’ collective bargaining rights.
The appeals court’s decision is a significant victory for gig economy companies, which have long sought to classify their workers as independent contractors rather than full-time employees. The ruling allows Uber, Lyft, and other companies to continue operating in California without providing their drivers with benefits such as unemployment and health insurance. However, the controversy surrounding the classification of gig workers is far from over, and it remains to be seen how the issue will be resolved in the future.