Uber, Lyft, DoorDash workers remain contractors after CA Supreme Court ruling

More than 1.4 million Californians are app-based gig workers for companies such as Uber, Lyft, DoorDash and Instacart, according to the industry's latest estimates.

photo credit: Juliana Yamada for CalMatters
Ride-share drivers of the California Gig Workers Union
at a press conference outside the Supreme Court of California
in San Francisco on May 21, 2024.

In a major victory for gig-work companies, the California Supreme Court on Thursday upheld a voter-approved law that allows Uber and other app makers to treat their drivers and delivery workers as independent contractors instead of employees.

The decision on Proposition 22 was unanimous. Approved by 58% of California voters in 2020 and enacted the same year, Prop. 22 gave app-based gig workers some benefits but not full worker protections because the ballot initiative -- which gig companies spent more than $200 million to pass -- ensures they are not considered employees.

More than 1.4 million Californians are app-based gig workers for companies such as Uber, Lyft, DoorDash and Instacart, according to the industry's latest estimates.

The court was not considering the pros and cons of the gig economy. During oral arguments in May in San Francisco, justices zeroed in on whether Prop. 22 was incompatible with California law, which gives the Legislature responsibility over a complete workers' compensation system.

By declaring gig workers independent contractors, Prop 22 made them ineligible for workers' comp benefits. SEIU California, the Service Employees International Union that had sought to overturn the law on behalf of four gig workers, argued that this made the law unconstitutional.

The law about the Legislature and worker's comp "does not preclude the electorate from exercising its initiative power to legislate on matters affecting workers' compensation," Justice Goodwin Liu wrote in Thursday's ruling.

Advocates for gig workers said the ruling was a blow.

"This is a really tragic outcome," said Veena Dubal, a law professor at UC Irvine who focuses on labor and inequality. "But it's not the end of the road." Dubal speculated that labor advocates could put together a proposition of their own, or municipalities and the state could adopt ordinances and laws that are more worker-friendly -- such as making it illegal to set different wages for similar work based on algorithmic formulas.

Gig companies backed Prop. 22 in 2020 to win themselves an exclusion from a new state law known as Assembly Bill 5, which would have upended their business models by requiring them to consider their drivers and delivery workers as employees. Last month, Uber lost a legal battle to overturn AB 5 -- meaning only Prop. 22 stood in the way of forcing ride-hailing and delivery app companies to comply with it.

William Gould, professor emeritus at Stanford Law School and a former chairman of the National Labor Relations Board, called the ruling "an enormous setback for workers who are marginalized." Gould added that "companies showed this is the way to repeal what the Legislature does: using an expensive, well-financed campaign to deny worker rights."

Under Prop. 22, gig workers are promised guaranteed minimum earnings of 120% of minimum wage, health care stipends, occupational accident insurance and accidental death insurance. Many of the benefits come with stipulations:

• The guaranteed earnings are based on time on a "gig" and don't include time workers spend waiting for a ride or delivery.
  
• The health care stipends are for certain eligible workers only, excluding those who qualify for public assistance, including Medi-Cal.
  
• The occupational accident insurance has a $1 million limit
  
• Gig workers are reimbursed for their mileage, although at less than the IRS-mandated rate employees receive -- currently 35 cents a mile vs. 67 cents a mile. But this amount is included in the minimum earnings guarantee -- it is not in addition to it.
  
• Because Prop. 22 will stand, app-ba sed platform workers will continue to be ineligible for benefits such as sick pay, a minimum wage for all time worked, unemployment insurance and more.

Molly Weedn, spokesperson for the gig industry group Protect App-Based Drivers + Services, called the ruling "an overwhelming victory for voters' rights and the integrity of our state's initiative system."

Liz Jarvis-Shean, a spokesperson for DoorDash, had a similar statement: "This decision is a huge victory for California Dashers and voters - Prop 22 is here to stay."
Gig workers vowed not to give up.

"We'll continue to fight until we have justice for drivers and all workers," said Nicole Moore, president of Los Angeles-based Rideshare Drivers United.

Moore added that this ruling could mean "app companies are coming for all of our jobs, whether it's in health care, construction, entertainment."