California Supreme Court ruled last Thursday that Uber and Lyft drivers will continue to be classified as independent contractors, rather than employees.
The latest ruling by the judge comes in response to a lawsuit surrounding California’s Proposition 22. In the 2020 election year, nearly 10 million voters in California overwhelmingly passed Proposition 22, allowing companies in the gig economy like Uber to continue treating their workers as independent contractors without having to comply with the AB5 law proposed by union leaders.
However, four drivers and the Service Employees International Union (SEIU) were discontent with the referendum result and sought to overturn it in court. The trial court initially ruled Proposition 22 unconstitutional, but ultimately the Supreme Court justices rejected the plaintiffs’ arguments, upholding the constitutionality of the voter referendum result.
The judge’s ruling was a blow to the unions and their allies in the legislative arena. Lorena Gonzalez, chair of the California Labor Federation, criticized the judge’s decision, expressing disappointment that the court allowed tech companies to “buy their way out of basic labor laws”.
Uber viewed the judge’s latest ruling as a “win” for drivers. The company stated in a release, “This provides drivers with historic benefits and protections, while preserving their independence. Whether drivers or couriers choose to work a few hours a week, they now have the legal certainty to work when and where they want.”
Lyft also considered the unanimous decision by the California Supreme Court as upholding the will of the voters. “Proposition 22 received overwhelming support from nearly 10 million California voters, with the backing of over 120,000 drivers and 140 community organizations when it was proposed,” the company stated.
“After the enactment of Proposition 22, over 80% of surveyed drivers reported that it was beneficial to them,” the company said in a statement. “In fact, the median hourly earnings of California drivers on the Lyft platform in 2023 were 22% higher than in 2019.”
Over the past few years, employment classification issues for Uber, Lyft drivers, and other contract workers have been highly controversial in California. This was sparked by the signing of AB5 law by the California governor in 2019, directly impacting around 1 million self-employed individuals from various industries like ride-sharing, entertainment, trucking, translation, and more.
AB5 law altered the autonomous operation model of many industries’ independent contractors, leading companies in the gig economy like Uber, Lyft, DoorDash, and Postmates to forcibly reclassify self-employed workers as full-time employees with W-2 wage forms.
Supporters argue that when workers are classified as employees, they are entitled to minimum wages, overtime pay, and other benefits. However, opponents including industry workers argue that this rigidly restricts the rights and flexibility of work for independent contractors.
Many self-employed individuals interviewed expressed that while AB5 law aimed to advocate for workers’ benefits, it may not be suitable for every industry and could even indirectly hinder many freelance opportunities.
A Chinese Uber driver mentioned that many people drive for ride-sharing services to earn extra income while balancing family responsibilities. Working more for extra income is fair and reasonable. If they were turned into employees, this job would lose its major advantage.
The unanimous ruling by the high court last Thursday concludes years of legal battles between unions and tech companies, permitting companies like Uber and Lyft to operate as before, and employees to continue working in the existing model.