California Supreme Court Upholds Prop 22, Boosts Gig Economy

The California Supreme Court has upheld Proposition 22, allowing app-based services like Uber and Lyft to consider drivers as independent contractors rather than employees. This decision is pivotal for the ride-hailing industry, which has argued that requiring employee status would limit services. The ruling dismisses a lawsuit challenging the proposition's constitutionality.

The California Supreme Court on Thursday upheld a measure approved by voters, allowing app-based services such as Uber and Lyft to categorize drivers as independent contractors rather than employees entitled to greater benefits. This ruling is seen as a significant victory for the ride-hailing industry, which has warned of limited services if forced to treat drivers as employees.

The decision dismisses a lawsuit filed by the Service Employees International Union (SEIU) and four drivers, arguing that the 2020 ballot measure named Proposition 22 was unconstitutional. The debate over whether gig workers should be treated as employees or contractors remains central to the ride-service industry's business model. Employees receive minimum wage, overtime pay, expense reimbursements, and other protections not extended to independent contractors, who can cost companies up to 30% less, according to multiple studies.

Uber, Lyft, and other app-based services invested over $200 million to pass Prop 22, advocating that it enables drivers to continue earning while enjoying the flexibility of part-time gig work. Approved by nearly 60% of voters in November 2020, Prop 22 permits app-based transportation services to classify drivers as independent contractors if they earn at least 120% of the minimum wage during passenger trips and receive expense reimbursements and health insurance subsidies.

(With inputs from agencies.)