The Supreme Court of California ruled on Thursday that drivers working for companies such as Uber and Lyft are categorized as contractors, thus disqualifying them from accessing benefits granted to regular employees.
When workers are classified as employees, they are entitled to minimum wages, overtime pay, and other benefits. On the other hand, ride-sharing companies argue that forcing them to treat drivers as employees could end up limiting ride-hailing and food-delivery services in the state or shut them down completely.
The key argument of the plaintiffs was that Proposition 22 conflicts with certain provisions of the California Constitution, which gives the state Legislature the authority to “create, and enforce a complete system of workers’ compensation.” However, the California Supreme Court dismissed the arguments.
SEIU California Executive Director Tia Orr said the union was disappointed by the ruling but that ride-share drivers could continue to fight for their rights by seeking to unionize.
Freedom to Work
Uber welcomed the Supreme Court ruling, saying it affirmed the will of almost 10 million Californians who voted for Proposition 22.“Whether drivers or couriers choose to earn just a few hours a week or more, their freedom to work when and how they want is now firmly etched into California law, putting an end to misguided attempts to force them into an employment model that they overwhelmingly do not want,” the firm stated.
Uber says its drivers and couriers have received more than $1 billion dollars in benefits since Proposition 22 was passed.
Lorena Gonzalez, president of the California Federation of Labor Unions, criticized the ruling, saying she was “disappointed” the court has allowed tech companies to “buy their way out of basic labor laws.”
Ms. Gonzalez blamed the companies for having “upended our social contract, forcing workers and the public to take on the inherent risk created by this work, while they profit.”
The association represents 1,300 unions with more than 2 million members.
Lyft said it was “thrilled” with the ruling, noting that more than 120,000 drivers had backed Proposition 22.
“After Prop. 22 went into effect, more than 80 percent of California drivers surveyed said that it has been good for them. In fact, median hourly earnings of drivers on the Lyft platform in California were 22 percent higher in 2023 than in 2019,” the company said.
More than 10 million people in California used Lyft to find a driver last year, with nearly four out of 10 rides starting or ending in low-income areas, it stated.
California is just one front in a nationwide legal battle over the classification of gig drivers and other contract workers.
Minnesota lawmakers passed a measure in May that would set a minimum wage of $1.28 per mile and $0.31 per minute for gig drivers, replacing a higher minimum adopted by Minneapolis that spurred Uber and Lyft to threaten to cease operating in the city.
In June, Uber and Lyft agreed to adopt a $32.50 hourly minimum wage for drivers in Massachusetts and pay $175 million to settle a lawsuit by the state claiming they improperly treated drivers as independent contractors. A proposal that would allow app-based drivers to unionize will go before voters in the state in November.
