California court to weigh fate of law treating app-based drivers as contractors

By Daniel Wiessner

(Reuters) – California’s highest state court on Tuesday will consider a union’s challenge to a ballot measure that allows app-based services like Uber and Lyft to classify drivers in the state as independent contractors rather than employees with more benefits.

The seven-member California Supreme Court will hear oral arguments in San Francisco in a lawsuit by the Service Employees International Union (SEIU) and four drivers who say the 2020 ballot measure known as Proposition 22 was unconstitutional.

Whether freelancers should be treated as employees or contractors is a crucial question for the industry, since employees are entitled to minimum wage, overtime pay, expense reimbursements and other protections that do not extend to independent contractors, who As a result, they can cost companies up to 30% less, according to several studies.

Uber, Lyft and other app-based services spent more than $200 million on a campaign to pass Proposition 22 and have said that without it, rising costs could force them to stop doing business in the largest state. of the United States.

A study released Monday by researchers at the University of California, Berkeley, found that the majority of drivers in five major U.S. cities, including Los Angeles and San Francisco, earn significantly less than the minimum wage when taken into account. counts total costs, including downtime. . According to the report, drivers in California were paid less than their counterparts in Boston, Chicago and Seattle.

Joseph Bryant, executive vice president of SEIU, said the Proposition 22 case is a key piece in a campaign to ensure basic legal protections for gig workers nationwide and “reverse more than a decade of exploitation.”

“No matter the outcome, we will not be intimidated by corporations’ unconstitutional attempts to make laws in California,” Bryant said in a statement.

The California Attorney General’s office, which is defending Proposition 22, declined to comment and referred to its filings in the case.

Protect App-Based Drivers and Services, an industry-backed group that intervened in the case on behalf of the state, provided a statement from Stephanie Whitfield, an Instacart driver who said the flexibility of her job has allowed her to focus on her care. medical. health while earning a living.

“It’s not just about me, it’s about ensuring that the people and families I deliver to can continue to have access to the services they depend on,” Whitfield said.


California is just one front in a nationwide legal battle over the proper classification of drivers and other contract workers. Minnesota lawmakers passed a measure over the weekend that would set a minimum wage of $1.28 per mile and 31 cents per minute for gig drivers, replacing a higher minimum adopted by Minneapolis that pushed Uber and Lyft to threaten to stop operating in the city.

Earlier this month, Massachusetts’ high court heard arguments over whether competing ballot proposals that would redefine the relationship between app-based companies and drivers in that state should be allowed to go before voters in November. One proposal supported by industry groups mirrors Proposition 22, while another would allow drivers to unionize.

And trial began last week in a lawsuit by the Massachusetts attorney general accusing Uber and Lyft of illegally classifying their drivers as contractors to avoid treating them as employees entitled to minimum wage, overtime and earned sick time.

Meanwhile, the U.S. Department of Labor is facing several legal challenges to a rule that would make it harder for companies in many industries, including app-based services, to treat workers as independent contractors.

Proposition 22 was approved in November 2020 by nearly 60% of voters in California. It exempts drivers who use apps from a 2019 state law known as AB5 that narrowed the circumstances under which many workers can be treated as contractors.

Instead, Proposition 22 allows app-based transportation services to classify drivers as independent contractors as long as they are paid at least 120% of the minimum wage while passengers are in the car and receive expense reimbursements and subsidies to pay for health insurance.

In 2021, a state judge found that Proposition 22 violated the state constitution because it limited the legislature’s power to include drivers within the scope of California workers’ compensation law.

Last year, a mid-level appeals court disagreed and revived the measure. That court said the California Constitution allows the state’s electorate, along with the legislature, to make changes to the workers’ compensation system.

(Reporting by Daniel Wiessner in Albany, New York, Editing by Alexia Garamfalvi and Aurora Ellis)