Certain gig-economy drivers can receive some employment benefits while continuing to enjoy their status as independent contractors, the California Supreme Court decided last month in upholding Proposition 22. (Castellanos v. State of California, S279622, July 25, 2024.)
In 2019, Assembly Bill 5 enacted the “ABC” test, which allowed employers to determine if their workers were traditional employees or independent contractors. This reclassified many workers who were previously independent contractors as employees, which the workers feared would reduce their flexibility in setting their own schedules. In response, gig-economy companies, led by Uber and Lyft, lobbied to get Proposition 22 on the ballot, which would, in certain circumstances, allow gig-economy workers to remain classified as independent contractors while also entitling them to some benefits traditionally given only to employees. Provided drivers worked an average of 25 hours per week, they qualified for a guaranteed minimum wage and health insurance subsidies. Notably, it did not give gig-economy drivers any workers’ compensation benefits.
In 2020, Proposition 22 passed, with 58% of voters supporting the measure. However, in 2021, a major labor union challenged the constitutionality of Proposition 22, claiming that it interfered with the Legislature’s exclusive right to determine workers’ compensation benefits. Uber, Lyft, DoorDash, Instacart, and other gig companies that had backed Proposition 22 argued that their businesses relied on Proposition 22 being upheld – without it, they claimed, they would have to shut down California operations, as the cost of doing business here would be prohibitively high.
In a major win for companies using app-based drivers, the California Supreme Court secured the right for gig-economy companies like Uber and Lyft to classify their drivers as independent contractors. While Proposition 22 and the ensuing Supreme Court decision are limited to app-based rideshare and delivery drivers, the Court’s decision to uphold Proposition 22 could potentially have implications for other gig-economy workers and companies.
If you would like more information on the rights and benefits now afforded to gig-economy drivers or would like to learn how this could potentially affect independent contractors in other industries, please contact Duckor Metzger & Wynne, APLC Shareholder Katherine C. Fine at (619) 209-3058 or fine@dmwplc.com.