California’s highest court on Thursday ruled that a 2020 law that allows Uber, Lyft and other gig-economy firms to treat drivers as independent contractors rather than employees is constitutional, bringing at least a temporary end to one of the most expensive political fights of the technology age.
In a unanimous decision, the court rejected claims by gig workers that a section of the law interfered with the state legislature’s authority over worker’s compensation issues.
The opinion leaves in place Proposition 22, a ballot measure approved in 2020 that classified drivers for app-based transportation and delivery companies as independent contractors, rather than employees, with some exceptions.
As independent contractors, drivers and delivery workers are not covered by minimum wage, overtime, unemployment insurance or workers’ compensation. The proposition did include some protections for gig workers, including a cap on how many hours they could work in a day and wage and health care benefits for the most active drivers.
That measure, in itself, superseded Assembly Bill 5, legislation passed in 2019 that established a three-part test to determine whether drivers and delivery workers were employees.
The largest players in the gig economy space spent millions lobbying against Assembly Bill 5, and then hundreds of millions in favor of Proposition 22. Uber and DoorDash spent more than $51 million to pass the ballot measure, while Lyft doled out $47 million, and the parent companies of InstaCart and Postmates spent tens of millions more. A coalition of unions cobbled together less than a tenth of the total spending by supporters, and Proposition 22 passed with almost 59% of the vote.
Groups that advocate on behalf of the technology industry celebrated Thursday’s ruling. The major gig economy firms have always characterized the independent contractor arrangement as a benefit for workers who want flexible hours.
“Rideshare drivers want to be their own boss and set their own schedule,” said Adam Kovacevich, chief executive of the Chamber of Progress, a tech industry-funded advocacy group. “That’s a top benefit of the job and this decision protects that independence.”
Unions that challenged the suit called the decision disappointing, though they pledged to continue pushing for a driver’s union.
“[W]e are hopeful that an earlier ruling which validated the state legislature’s authority to pass laws enabling ride share drivers to join together in a union gives workers a path to collectively bargain for better pay, benefits and protections. Gig workers are determined to ensure fairness in the gig economy and won’t stop fighting to win greater workplace rights and protections on the job,” said Tia Orr, executive director of SEIU California, which initiated the legal challenge.
The emergence of the gig economy has forced blue states, especially, to reconsider how they define workers who do not have ordinary relationships with their employers. Democratic lawmakers have sought to add protections and guarantees for those workers, but the gig companies have largely reached agreements with legislators along the lines of Proposition 22 — in which workers remain independent contractors, but with some protections or benefits.