California Supreme Court upholds gig worker law in a win for ride-hail companies

SACRAMENTO, California — The California Supreme Court upheld a law classifying gig workers as independent contractors, ineligible for certain benefits, offering a major win to ride-hail companies like Uber and Lyft.

Thursday’s ruling capped a yearslong battle between labor and the companies over the status of workers who are dispatched by apps to deliver food, buy groceries and transport customers. A 2018 Supreme Court ruling and a follow-up bill would have compelled the gig companies to treat those workers as employees.

A collection of five firms then spent more than $200 million to escape that mandate by passing the 2020 ballot measure Proposition 22 in one of the most expensive political campaigns in American history.

The unanimous ruling on Thursday now upholds the status quo of the gig economy in California.

As independent contractors, gig workers are not entitled to benefits like sick leave, overtime and workers’ compensation. The SEIU union and four gig workers, ultimately, challenged Prop 22 based on its conflict with the Legislature’s power to administer workers’ compensation, specifically. The law, which passed with 58 percent of the vote in 2020, makes gig workers ineligible for workers’ comp, which opponents of Prop 22 argued rendered the entire law unconstitutional.

Attorneys for the campaign behind Prop 22, a ride-hail company-backed coalition called Protect App-Based Drivers + Services, responded by saying the initiative process has power equal to the Legislature, including augmenting workers’ comp statutes. The group called Thursday’s decision a “historic ruling” that would protect a measure that voters “overwhelmingly supported.”

“The California Supreme Court ruling is an overwhelming victory for voters’ rights and the integrity of our state’s initiative system,” said Protect App-Based Drivers + Services spokesperson Molly Weedn. “The courts have spoken, and this issue can finally be put to rest.”

During oral arguments earlier in the spring, justices seemed hesitant to overturn the law outright, but also expressed concern that a future initiative could go so far as to get rid of workers’ compensation completely. The court’s opinion on Thursday noted that it was not making a determination about the extent of initiative power.

“We reserve these issues until we are presented with an actual challenge to an act of the Legislature providing workers’ compensation to app-based drivers,” the justices wrote.

As the SEIU-backed challenge worked its way through the courts, Uber has fortified its political footprint in California, spending millions of dollars this year to elect like-minded Democrats to the Legislature. Had the Supreme Court overruled Prop 22, gig workers would have been classified as employees under California's updated employment law. Vice President Kamala Harris was among the Democratic leaders who supported recognizing gig workers as employees, while serving as a U.S. senator for California.

In a statement, SEIU leadership said they were “disappointed” in the ruling but would continue to fight for a ride-hail driver union to advocate for further rights and protections.

“Prop 22 has allowed gig companies like Uber, Lyft and DoorDash to deprive us of a living wage, access to workers compensation, paid sick leave and meaningful health care coverage,” SEIU California Executive Director Tia Orr said in a statement. “Today’s ruling only strengthens our demand for the right to join together in a union so that we can begin improving the gig economy for workers and our customers.”

Beyond the implications for gig workers, the heavily-funded Prop 22 ballot campaign pushed the limits of what could be spent on an initiative, ultimately becoming the most expensive measure in California history. Uber and Lyft have both threatened to leave any states that pass laws not classifying their drivers as independent contractors.

The decision Thursday closes the door to that possibility for California.

Jeremy White contributed to this report.