Uber and Lyft Get a Big Win: California Supreme Court Upholds Independent Contractor Status for App-Based Drivers

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  • Uber and Lyft Get a Big Win: California Supreme Court Upholds Independent Contractor Status for App-Based Drivers

In a landmark ruling, California’s Supreme Court has solidified the status of app-based drivers, such as those working for Uber and Lyft, as independent contractors. This decision announced last Thursday, upholds Proposition 22, a measure approved by California voters in 2020. The ruling represents a significant victory for the ride-hailing industry, which has argued that classifying drivers as employees would force many companies to reduce or even cease operations in the state.

The case brought forth by the Service Employees International Union (SEIU) and four drivers challenged Proposition 22, deeming it unconstitutional. They contended that the measure unjustly limited the state’s ability to regulate workers’ compensation for app-based drivers. However, the California Supreme Court dismissed these claims, affirming that the voter-approved proposition stands. This decision ensures that drivers retain their independent contractor status while receiving certain benefits, such as minimum wage guarantees and health insurance subsidies.

Uber celebrated the ruling, emphasizing that it respects the will of nearly 10 million Californians who voted in favor of Proposition 22. According to Uber’s statement, the measure delivers historic benefits and protections to drivers while maintaining their independence. On the other hand, SEIU California Executive Director Tia Orr expressed disappointment but vowed to continue advocating for greater rights and protections for gig workers, including potential unionization efforts.

The classification of gig workers has been a contentious issue nationwide, with significant financial implications for companies. Independent contractors, unlike employees, do not qualify for minimum wage, overtime pay, or expense reimbursements, making them up to 30% cheaper for businesses. This cost-saving aspect is crucial for companies like Uber and Lyft, which invested over $200 million in a campaign to pass Proposition 22. They argue that the flexibility of gig work is a key benefit for drivers, allowing them to earn money on their own schedules.

California’s ruling is a pivotal moment in the broader legal battle over gig worker classification. Other states are grappling with similar issues. For instance, Minnesota recently passed a measure establishing a minimum wage for gig drivers, and Massachusetts has seen Uber and Lyft agree to a $32.50 hourly minimum wage and a $175 million settlement over improper driver classification. As the debate continues, the California Supreme Court’s decision will likely influence future legislative and legal actions across the United States.

For more information on employee/independent contractor classification, reach out to us at info@mnklawyers.com. We look forward to hearing from you.

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