In a major victory for gig-work companies, the California Supreme Court today 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.

Levi Sumagaysay

CalMatters

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.

Related Story: Court Rules Uber, Lyft Drivers Not Entitled to Benefits, Worker Protections

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 today’s ruling.

Liu also wrote that a section of Prop. 22 “does not itself restrict the Legislature’s authority to enact workers’ compensation legislation.”

Scott Kronland, the attorney who argued the case on behalf of SEIU California, told CalMatters that the ruling “expressly leaves open the possibility of legislation that provides worker’s compensation benefits for app drivers.”

Still, 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.

Related Story: Gig Companies Spent $200M to Write a Labor Law. State Supreme Court Could Throw ...

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-based platform workers will continue to be ineligible for benefits such as sick pay, a minimum wage for all time worked, unemployment insurance and more.

Representatives of Uber, DoorDash and Instacart sent statements hailing the decision as a win for gig workers and for California voters.

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.”

A driver in Coachella Valley who participated in the industry group’s press conference today, Stephanie Whitfield, said she has relied on her income from driving to supplement her substitute-teaching income, especially after having major back surgery.

Related Story: After Court Ruling, California’s Gig Worker Battle Takes New Turn

“I needed something I could work around my doctor’s appointments,” Whitfield said. “App-based driving has been invaluable to me.”

But other gig workers said Prop. 22 has not helped them much. They said their wages have stayed low and their benefits fall short of what they want.

Sergio Avedian, a ride-hailing driver, podcaster and contributor at the Rideshare Guy, a popular gig-work blog, said the ruling means “the hunger games continue… it means (only) a small percentage of drivers receive (Prop. 22) benefits due to restrictions.”

Another driver, Alejandro Partida, said during a press conference by Los Angeles-based Rideshare Drivers United: “We’ve seen how (Prop 22) it harms workers… who are mostly immigrants and people of color. (We) are entitled to worker protections just like other employees.”

Gig worker advocates vowed not to give up.

“We’ll continue to fight until we have justice for drivers and all workers,” Nicole Moore, president of Los Angeles-based Rideshare Drivers United, told CalMatters. Moore added that this ruling could mean “app companies are coming for all of our jobs, whether it’s in health care, construction, entertainment.”

Moore said during the press conference: “We need the help of legislators, the attorney general, of cities to find a creative pathway to ensure that drivers have adequate pay for our families.”

About the Author

Levi Sumagaysay covers the California economy for CalMatters with an eye on accountability and equity. She reports on the insurance market, taxes and anything that affects the state’s residents, labor force and economy.

About the CalMatters

CalMatters is a nonprofit, nonpartisan newsroom committed to explaining California policy and politics.