App-based ride-hailing and delivery companies like Uber and Lyft can continue to treat their California drivers as independent contractors, a state appeals court ruled Monday, allowing the tech giants to bypass other state laws requiring worker protections and benefits. The ruling mostly upholds a voter-approved law, called Proposition 22, that said drivers for companies like Uber and Lyft are independent contractors and aren't entitled to benefits like paid sick leave and unemployment insurance. A lower court ruling in 2021 had said Proposition 22 was illegal, but Monday's ruling reversed that decision, per the AP. "Today's ruling is a victory for app-based workers and the millions of Californians who voted for Prop 22," said Tony West, Uber's chief legal officer. "We're pleased that the court respected the will of the people."
The ruling is a defeat for labor unions and their allies in the state Legislature who 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," said Lorena Gonzalez Fletcher, leader of the California Labor Federation and a former state assemblywoman who authored the 2019 law. "Our system is broken. It would be an understatement to say we are disappointed by this decision." The ruling wasn't a complete defeat for labor unions, as the court ruled the companies couldn't stop their drivers from joining a labor union and collectively bargaining for better working conditions, said Mike Robinson, one of the drivers who filed the lawsuit challenging Proposition 22.
The California Legislature passed a law in 2019 that changed the rules of who is an employee and who is an independent contractor. It's an important distinction for companies because employees are covered by a broad range of labor laws that guarantee them certain benefits, while independent contractors aren't. Although the law applied to lots of industries, it had the biggest impact on app-based ride-hailing and delivery companies. Their business model relies on contracting with workers to use their own cars to give people rides and make deliveries. Under the 2019 law, companies would have to treat those drivers as employees and provide certain benefits that would greatly increase the businesses' expenses.
In November 2020, voters agreed to exempt app-based ride-hailing and delivery companies from the 2019 law by approving a ballot proposition. The proposition included "alternative benefits" for drivers, including a guaranteed minimum wage and subsidies for health insurance if they average 25 hours of work a week. Three drivers and the Service Employees International Union sued. In 2021, a state judge agreed with them and ruled companies like Uber and Lyft weren't exempt. The state appeals court's Monday ruling reversed that, although it may not be the final decision. The SEIU could still appeal the decision to the California Supreme Court, which could decide to hear the case.
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