California Court: App-based Drivers Are Contractors

Facts

• A California appeals court Monday ruled to largely uphold Proposition 22, a voter-approved law that classified drivers for ride-share and delivery companies as independent contractors.¹
• A November 2020 vote exempted companies like Uber, Lyft, and DoorDash from needing to adhere to a 2019 law requiring them to provide benefits such as paid sick leave and unemployment insurance. It granted 'alternative benefits' to drivers, including a guaranteed minimum wage and health insurance subsidies.²
• The vote came after California sued Uber and Lyft in 2020, claiming the companies were violating the 2019 law, which classified drivers as employees.³
• A legal battle resulted in Prop 22, which passed with around 59% of the vote, for which Gig-economy companies spent $200M on their campaign. In 2021, a lower-court judge struck down Prop 22, which eventually reached the appeals court.⁴
• Monday's ruling, which could be appealed to the state Supreme Court, doesn’t preclude drivers from being able to join a labor union.⁵

Sources: ¹Reuters, ²NPR Online News, ³Wall Street Journal, ⁴Washington Post and ⁵Forbes.

Narratives

• Narrative A, as provided by Daily caller. This is a crucial victory for companies that rely on independent-contractor drivers for the survival of their business. The independent-contractor model saves companies from having to pay costly benefits, and in return, drivers get some benefits in addition to the flexibility that’s proven immensely popular since Prop 22 took effect.
• Narrative B, as provided by Verge. Gig companies shouldn’t celebrate just yet. The Service Employees International Union intends to appeal in an effort to make sure drivers are afforded the rights of all other workers in the state. In addition, the US Federal Trade Commission is looking into accusations of wage-fixing, and the Department of Labor is considering a federal law to classify more contractors as employees.