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An appeals court in California recently ruled that ride-hailing and delivery apps like Uber and Lyft can continue to designate their drivers as independent contractors, exempting them from other state regulations protecting employees.
Voters in California enacted Proposition 22 in 2016, which established that drivers for rideshare services like Uber and Lyft are considered independent contractors and are, therefore, not eligible for benefits like paid sick leave or unemployment insurance. This verdict largely upholds that rule. Monday’s ruling overturned a lower court’s 2021 determination that Proposition 22 was unconstitutional.
Uber’s chief legal officer, Tony West, hailed the decision as a win for the millions of Californians who voted for Prop 22 and all app-based workers. “We’re relieved the court upheld the popular vote,” he says.
The verdict is a loss for labor unions and their legislative supporters who pushed for a measure in 2019 that would have treated drivers for businesses like Uber and Lyft as employees.
California Labor Federation President and former state assemblywoman Lorena Gonzalez Fletcher said, “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.” Gonzalez Fletcher authored the 2019 law. To paraphrase, “Our system is messed up. To say we are dismayed by this decision would be an understatement.”
A Positive Alternative
According to Mike Robinson, one of the drivers who initiated the lawsuit challenging Proposition 22, the result was not a total setback for labor unions because the court determined the corporations could not restrict their drivers from joining a labor union and collective bargaining for better working conditions.
For drivers and delivery employees, “Our right to join together and bargain collectively gives a clear avenue to hold huge gig firms accountable,” he said. “But let there be no doubt, we still hold that Proposition 22 is, in its totality, an unlawful attack on our core rights,” he adds.
There have been changes to the definitions of employees and independent contractors according to a 2019 bill passed by the California legislature. An employee is protected by a variety of labor regulations that ensure they receive certain benefits, but an independent contractor is not.
Although the regulation was broadly applicable, it greatly affected ridesharing and delivery services that relied on mobile apps. Their service is based on hiring independent contractors to drive for them and transport customers or deliver goods. In accordance with the new legislation expected in 2019, businesses will be required to classify drivers as workers and pay for various benefits, which will significantly impact their budgets.
Voters in 2020 agreed to an initiative that would exempt app-based ride-hailing and delivery companies from the 2019 law. To compensate for drivers working less than 25 hours per week, the proposal included “alternative benefits,” such as a guaranteed minimum pay and health insurance subsidies. Transportation network companies invested around $200 million to ensure its success, including Uber, Lyft, and DoorDash.
What Comes Next?
Three truck drivers and the Service Employees International Union filed a lawsuit, claiming the ballot initiative was unconstitutional because it would restrict the state legislature’s ability to amend or approve laws regarding workers’ compensation. A state judge agreed with them in 2021, ruling that ridesharing services like Uber and Lyft were not exempted from this.
However, the appeals court for the state overturned that ruling, clearing the way for the corporations to continue regarding the drivers as contractors.
It’s possible the judgment won’t stand as the final word. There is still a chance that the California Supreme Court may hear the Service Employees International Union on their appeal of the judgment.
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