California court ruling preserves independent contractor model for Uber, Lyft, others

Decision follows intense lobbying by gig economy employers

California court ruling preserves independent contractor model for Uber, Lyft, others

A California appeals court ruling has scored a victory for Uber, Lyft, and other gig economy companies by preserving their independent contractor model in the state. The ruling could also bolster their efforts to maintain this model elsewhere.

The state appeals court stated that workers should continue to be treated as independent contractors under a California ballot measure known as Proposition 22.

However, the court did ask that a clause that restricted collective bargaining by workers be severed from it.

Proposition 22, which was passed in November 2020, allowed these companies to continue to treat their labor force as independent contractors. A California court deemed it unconstitutional in 2021. The latest ruling on Monday reversed parts of that lower-court ruling.

The gig economy giants are in a global tug of war with regulators over whether and how to grant more benefits such as paid sick leave and health insurance to workers in the gig economy. Apps distribute individual tasks to a pool of people whom companies generally regard as independent contractors.

The legal fight began in 2020 when California sued Uber and Lyft for violating a new state law that sought to reclassify their drivers as employees. The companies argued that their drivers should be classified as independent contractors. Proposition 22 exempted them from the law and promised workers some benefits alongside flexibility if it passed.

The companies spent a record amount of $200 million on the ballot measure, promising that a reclassification would reduce flexibility and increase ride-share and delivery prices for consumers. A group of ride-share drivers and labor unions challenged the constitutionality of Proposition 22.

In August 2021, a California judge ruled that the proposition was unconstitutional because it limited the state legislature's authority and its ability to pass future legislation.

The companies appealed that decision, leading to Monday's ruling in the California First District Court of Appeal.

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