Uber and Lyft can continue to treat their drivers as contractors in California, a state appeals court ruled Monday, in a major victory for the ride-share companies.
The ruling by the 1st District Court of Appeal in San Francisco largely overturned a lower court’s 2021 ruling that Proposition 22 — passed by California voters the previous year — was unconstitutional and “unenforceable.”
Prop 22 exempts delivery-app and ride-share companies such as Uber and Lyft — pioneers of the digital gig economy — from classifying their drivers as employees, meaning the companies do not have to provide benefits such as health insurance. (They are required to provide a stipend toward health insurance coverage for drivers who work a minimum number of hours per week.)
The Service Employees International Union, which had filed suit seeking for Prop 22 to be invalidated, said it is considering appealing the ruling to the Supreme Court of California.
Uber, Lyft and other gig-economy apps poured $200 million into the campaign to pass Prop 22. The measure passed with about 59 percent of the vote, but some voters said they misunderstood the question on their ballots and meant to give drivers more benefits, not fewer.
The appellate court said the majority of Prop 22 was constitutional, including the stipulation that drivers be hired as contractors instead of employees.
But it struck down a section of the measure that had restricted drivers’ abilities to unionize by requiring a seven-eighths supermajority to amend the measure in the state legislature. The requirement, the court said in its 63-page ruling, “effectively locks in place the status quo of drivers not being able to collectively bargain.”
That aligned the appellate court with Alameda County Superior Court Judge Frank Roesch, who ruled in 2021 that the threshold was “difficult to the point of near impossibility.”
California judge rules unconstitutional the measure classifying Uber and Lyft drivers as contractors
Mike Robinson, a gig worker and plaintiff in the suit, said in a statement issued by SEIU that he believed Prop 22 “in its entirety” was unconstitutional, though he thanked the court for reaffirming drivers’ ability to unionize.
“Drivers have always led this movement, and we will follow their lead as we consider all options — including seeking review from the California Supreme Court — to ensure that gig drivers and delivery workers have access to the same rights and protections afforded to other workers in California,” Tia Orr, executive director of SEIU California, said in a statement.
Uber’s chief legal officer, Tony West, said in a statement that the ruling was “a victory for app-based workers,” adding that Prop 22 “affords them new benefits while preserving the unique flexibility of app-based work.”
Lyft said in a statement that it was “pleased that the court upheld the democratic will of the voters” and that it would continue operating its service as usual. The two ride-hailing companies had previously suggested that they would withdraw operations in California if the law did not allow them to classify drivers as contractors.
Among the benefits afforded by Prop 22, Lyft said, is a requirement that gig workers earn at least 120 percent of the minimum wage for “booked time” — between when they accept a ride or delivery and when they drop off a passenger or goods.
However, “booked time” does not include time spent waiting for an offer for a worthwhile ride or delivery. The University of California at Berkeley’s Labor Center found in a 2019 analysis that the wages guaranteed by Prop 22 were equivalent to $5.64 per hour. Various “loopholes,” including not counting waiting time as work time, contribute to the gap, the center found.
The proposition requires that the health-care stipend be provided to drivers who have more than 15 hours of “booked time” per week.
Shares in Uber, Lyft and DoorDash, a delivery app, rose in after-hours trading.