The California Supreme Court ruled on Thursday that Proposition 22, a ballot measure passed in November 2020 that classified app-based gig workers as independent contractors rather than employees, would remain in place.
The decision is a victory for app-based companies like Uber, Lyft, DoorDash and Instacart, which have struggled to maintain business models that rely on one-time workers to provide on-demand rides to riders and deliver food and other goods.
“Whether drivers or couriers choose to earn a few hours a week or more, their freedom to work when and how they want is now firmly enshrined in California law, putting an end to misguided attempts to force them into an employment model they overwhelmingly do not want,” Uber said in a blog post.
Lyft shared similar sentiments in its own post, saying more than 80% of California drivers said Prop 22 had helped them.
Opponents of Prop 22: Technically The ruling ended a long-running court battle over California's classification of gig workers, although there are still petitions asking the Supreme Court to review the ruling.
A year after 58% of California voters voted for Prop 22, a high court judge ruled that the initiative was unconstitutional and therefore “unenforceable.” At the time, Justice Frank Loesch said Prop 22 limited the power of the state legislature and its ability to pass future legislation.
Thursday’s ruling, on the other hand, ruled that classifying app-based drivers as independent contractors does not conflict with a provision in the California Constitution that gives the Legislature authority over workers’ compensation. It upholds a California appeals court ruling in March 2023 that overturned Roesch’s ruling.
Proposition 22 was Uber, Lyft, DoorDash, and Instacart’s response to Proposition 5, a state law that would require companies to classify their workers as employees and provide them with minimum wage, workers’ compensation, and other benefits.
These companies have spent more than $200 million on advertising to convince drivers and California voters that Prop 22 is in their best interest.
App-based companies have built their entire business models on the assumption that they won’t have to pay for health insurance, sick leave, and other services provided to regular employees. The asset-light model, which relies on gig workers using their own vehicles to pick up passengers and deliver food, is central to each company’s goal of lowering capital expenditures and scaling widely.
Prop 22 attempted to find a middle ground between providing workers with employment and keeping them as unpaid contractors. Under Prop 22, workers would be entitled to 120 percent of the state’s minimum wage for hours worked, adjusted for inflation, plus 30 cents for every mile they worked after 2021. (Uber, Lyft, and DoorDash have not actually adjusted for inflation, and last year had to repay gig workers millions of dollars for unpaid ride costs.)
However, the so-called minimum wage only applies when workers are actively participating in the gig, and does not compensate drivers for the time they spend waiting for a gig. Companies expect workers to be willing to accept gigs and maintain a reputation for providing on-demand services.
Critics argued that the income guarantee was inadequate, falling short of the minimum wage paid to actual drivers, considering job-related costs such as vehicle maintenance, fuel and insurance.
Prop 22 also provides health care subsidies for drivers who work a certain number of hours a week, but drivers told TechCrunch it’s hard to qualify for them. Drivers have to work 15 hours a week to get half the benefit, and 25 hours a week to get the full benefit, said Sergio Avedian, a contributor to The Rideshare Guy, a media property for gig workers.
Avedian said the Supreme Court's ruling means “the Hunger Games continue.” He accused companies of using the minimum wage guarantee to keep driver rates below the legally required level.
“The minimum income guarantee is now also a cap, through an opaque algorithm,” Avedian told TechCrunch, noting that Prop 22’s position in California law will embolden Uber and other companies to “push the playbook nationally.”
Other benefits, such as accident insurance, disability benefits, and death benefits, are available as long as the worker is on the job when the injury occurs. So if a driver is waiting for work with the app turned on (i.e., not actively driving to pick up and drop off passengers) and is injured or killed, they are not eligible for those benefits.
Labor rights activists and app-based companies are fighting in states other than California. Last month, Uber and Lyft agreed to pay $175 million to settle a lawsuit from the state attorney general, claiming that the companies adopted a $32.50 minimum wage for drivers in Massachusetts and unfairly treated drivers as independent contractors.
In New York City, apps must pay delivery workers $19.56 per hour for the time they spend on the app, starting in April, but not for the time they actually perform deliveries. App-based companies like Uber Eats, DoorDash, and Grubhub have argued that the higher wage mandate would hurt end consumers after the companies pass on the extra costs to customers.
Uber and Lyft drivers in Minnesota will get a higher wage in May after the state passed a bill requiring drivers to be paid at least $1.28 per mile and $0.31 per minute.
Correction: A previous version of this article incorrectly stated that the Supreme Court’s ruling could be appealed. Those who oppose Prop 22 can petition the court to change the ruling.
This article has been updated to include statements from Uber and Lyft and more context on the nationwide fight over gig workers. It was originally published at 10:35 a.m. PT.
