California court says Uber, Lyft can classify drivers as contractors

Ride-sharing apps, including Uber and Lyft, can continue to treat their drivers as independent contractors, a California appeals court ruled Monday, overturning a lower court ruling that barred them from doing so.

In November 2020, California voters approved Proposition 22, which allowed creators of ride-sharing and delivery apps to classify their drivers as independent contractors. A California judge ruled the proposal unconstitutional in 2021, arguing that it violated the legislature’s power to set workplace standards. The state and a group representing the companies and others The parties appealed that decision and Monday’s ruling was in their favor.

Shares of ride-sharing and delivery companies rose on the news, with Uber, Liftand Door dash notching profits of more than 4% after hours.

App-based gig worker Jesus Barra stands on his car during a demonstration outside Los Angeles City Hall to urge voters to vote no on Proposition 22, a November ballot measure that would classify app-based drivers as independent contractors and not employees or agents, in Los Angeles, California , USA, 8 October 2020.

Mike Blake | Reuters

Prop. 22 created a set of criteria that determined whether rideshare drivers were employees or independent contractors> In effect, it exempted Uber and similar companies from complying with certain minimum wage, overtime or workers’ compensation laws for hundreds of thousands of California rideshare drivers. Instead ballot measure required the companies to provide reimbursement and “subsidies” for medical care based on “committed” driving time, as well as other benefits, including safety training and “sexual harassment training.”

It was most expensive ballot issue in California history, with ride-sharing companies contributing over $181 million to the “Yes” campaign. Business reportedly moved aggressively to urge its drivers to support the initiative, which passed with 58.6% of the vote.

A group of ride-sharing drivers tried to strike down Proposition 22 and won a lower court ruling. But in a 63-page opinion issued Monday, California judges from the 1st District Court disagreed with that court and upheld the proposal.

“Proposition 22 does not infringe on the Legislature’s workers’ compensation authority or violate the single-subject rule,” the opinion read.

“Today’s ruling is a victory for app-based workers and the millions of Californians who voted for Prop 22. Across the state, drivers and couriers have said they are pleased with Prop 22, which gives them new benefits while preserving the unique flexibility of app-based work. ,” Uber general counsel Tony West said in a statement.

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