Court rules Uber and Lyft can continue to treat California drivers as independent contractors
Sacramento, California. (AP) – Application based call and delivery companies such as Uber and Lyft can continue to treat their California drivers as independent contractors, a state appeals court ruled Monday, allowing the tech giants circumvent the laws of other states requiring protection and benefits for workers.
The ruling basically supports a voter-approved law called Proposition 22, which says drivers for companies like Uber and Lyft are independent contractors and are not eligible for benefits like paid sick leave and unemployment insurance. A 2021 lower court ruling declared Proposition 22 illegal, but Monday’s ruling reversed that ruling.
“Today’s decision is a victory for app workers and the millions of Californians who voted for Proposition 22,” said Tony West, Uber’s general counsel. “We are glad that the court respectfully treated the will of the people.”
The decision is a defeat for the unions and their allies in the state legislature, who in 2019 passed a law requiring companies like Uber and Lyft to treat their drivers like employees.
“Today, the Court of Appeals decided to side with powerful corporations, not workers, in allowing companies to buy off our state labor laws and undermine our state constitution,” said Lorena Gonzalez Fletcher, leader of the California Federation of Labor and former state legislator. Author of the law in 2019. “Our system is broken. It would be an understatement to say that we are disappointed with this decision.”
The decision was not a complete defeat for the unions, as the court ruled that companies cannot prevent their drivers from joining a union and collectively bargaining for better working conditions, said Mike Robinson, one of the drivers who filed the lawsuit challenging the proposal. 22
“Our right to associate and bargain collectively opens a clear path for drivers and deliveries to hold giant corporations accountable,” he said. “But make no mistake, we continue to believe that Proposition 22 – as a whole – is an unconstitutional assault on our fundamental rights.”
In 2019, the California Legislature passed a law that changed the rules about who is an employee and who is an independent contractor. This is an important distinction for companies because employees are subject to a wide range of labor laws that guarantee them certain benefits, while independent contractors do not.
While the law has applied to many industries, it has had the biggest impact on app-based car ordering and delivery companies. Their business is based on contracting people to use their own cars for people transportation and delivery. Under the 2019 law, companies will be required to treat these drivers as employees and provide certain benefits that will significantly increase business costs.
In November 2020, voters agreed to exclude app-based car ordering and delivery companies from the 2019 law by endorsing the ballot proposal. The proposal included “alternative benefits” for drivers, including a guaranteed minimum wage and health insurance subsidies if they work an average of 25 hours a week. Companies like Uber, Lyft and DoorDash have spent $200 million on the campaign to make sure it gets through.
The three drivers and the International Union of Employees sued, arguing that the proposal to vote was illegal in part because it limited the power of the State Legislature to change the law or pass laws on workers’ compensation programs. In 2021, a state judge agreed with them and ruled that companies like Uber and Lyft are no exception.
On Monday, a state appeals court overturned that decision, allowing companies to continue treating their drivers as independent contractors.
The decision may not be final. Employees International Union still has the option to appeal the decision to the California Supreme Court, which may decide to hear the case.
“We will consider all of these options as we decide how to ensure that the fight for these workers continues,” said Tia Orr, chief executive of SEIU California.