California Supreme Court Allows Uber, Lyft, DoorDash Workers to Become Contractors

In a major victory for gig economy companies, the California Supreme Court today upheld a voter-approved law that allows Uber and other app makers to treat their drivers and delivery drivers as independent contractors rather than employees.

The decision on Proposition 22 was unanimous. Approved by 58% of California voters in 2020 and passed into law the same year, Prop. 22 gave app-based gig workers some benefits but not full protections for workers, because the referendum initiative — which gig companies spent more than $200 million on — ensures they are not considered employees.

More than 1.4 million Californians work as gig workers through apps for companies like Uber, Lyft, DoorDash and Instacart, according to the latest industry estimates.

The court did not weigh the pros and cons of the gig economy. During oral arguments in May in San Francisco, the justices focused on whether Prop. 22 violated a California law that gives the legislature responsibility for the entire workers’ compensation system. By declaring gig workers independent contractors, Prop 22 stripped them of their right to workers’ compensation benefits. SEIU California, the Service Employees International Union, which sought to overturn the law on behalf of four gig workers, argued that made it unconstitutional.

The law on workers’ compensation legislation “does not preclude voters from exercising their legislative initiative to legislate on workers’ compensation matters,” Judge Goodwin Liu wrote in today’s ruling.

Liu also wrote that part of Prop. 22 “does not, by itself, limit the legislature’s authority to enact workers’ compensation legislation.”

Scott Kronland, an attorney representing SEIU California, told CalMatters that the ruling “clearly leaves open the possibility of legislation being passed that would provide app drivers with workers’ compensation benefits.”

Still, advocates for temporary workers say the ruling is a blow.

“This is a really tragic outcome,” said Veena Dubal, a law professor at UC Irvine who focuses on work and inequality. “But it’s not the end of the road.” Dubal speculated that labor advocates could come up with their own proposal, and that municipalities and states could pass ordinances and laws that are more friendly to workers — such as making it illegal to set different wages for similar work based on algorithmic formulas.

Gig companies backed Prop. 22 in 2020 to gain an exemption from a new state law known as Assembly Bill 5 that would have upended their business models by requiring them to treat drivers and delivery drivers as employees. Last month, Uber lost a legal battle to repeal AB 5 — meaning Prop. 22 was the only thing standing in the way of forcing ride-hailing and delivery app companies to comply with it.

William Gould, a professor emeritus at Stanford Law School and former chairman of the National Labor Relations Board, called the ruling “a huge setback for marginalized workers.” Gould added that “companies have shown that this is the way to overturn what the Legislature is doing: an expensive, well-funded campaign to deny workers’ rights.”

Under Prop. 22, gig workers are guaranteed a minimum wage of 120% of the minimum wage, health care stipends, occupational injury insurance, and accidental death insurance. Many of the benefits come with caveats:

• Guaranteed earnings are based on time spent on an “assignment” and do not include time employees spend waiting for a ride or delivery.
• Health care stipends are available only to certain eligible employees, excluding those who qualify for public assistance, including Medi-Cal.
• Workplace accident insurance has a limit of $1 million
• Gig workers are reimbursed for miles driven, albeit at a lower rate than the IRS rate—currently 35 cents per mile, down from 67 cents per mile. But that amount is included in the minimum wage guarantee—it’s not added to it.
• As Proposition 22 stands, app-based platform workers will still not be eligible for benefits such as sick pay, minimum wage for all hours worked, unemployment benefits, and more.

Representatives from Uber, DoorDash and Instacart sent statements praising the decision as a victory for temporary workers and California voters.

Molly Weedn, a spokeswoman for the gig industry group Protect App-Based Drivers + Services, called the ruling “an overwhelming victory for voter rights and the integrity of our state’s initiative system.”

Stephanie Whitfield, a Coachella Valley driver who attended an industry group news conference today, said she relies on her driving income to supplement her income from work as a substitute teacher, especially after major back surgery.

“I needed something I could do around doctor visits,” Whitfield said. “The app-based driving has been invaluable to me.”

But other gig workers said Prop. 22 hasn’t helped them much. They said their wages have remained low and their benefits are lower than they want.

Sergio Avedian, a ride-hailing driver, podcaster and contributor to Rideshare Guy, a popular blog about odd jobs, said the ruling means “the Hunger Games are on… it means (only) a small percentage of drivers are receiving (Prop. 22) benefits because of the restrictions.”

Another driver, Alejandro Partida, told a news conference for Los Angeles-based Rideshare Drivers United: “We’ve seen how (Prop 22) hurts workers … who are primarily immigrants and people of color. (We) have the right to worker protections just like any other worker.”

Supporters of temporary workers have said they will not give up.

“We will fight until we get justice for drivers and all workers,” Nicole Moore, president of Los Angeles-based Rideshare Drivers United, told CalMatters. Moore added that the ruling could mean “app companies are going to go after all of our jobs, whether they’re healthcare, construction, entertainment.”

During a news conference, Moore said, “We need help from legislators, attorneys general and cities to find a creative solution that will ensure drivers are paid adequate wages for our families.”