In a landmark decision, a California appellate court has overturned a lower court ruling and reinstated Prop 22, a ballot measure that classifies drivers of Lyft, Uber, Instacart, and DoorDash as independent contractors. This is a major win for these companies and for gig workers across California.
The ruling came after a contentious legal battle that began last year, following California’s passage AB5, a law that aimed to reclassify gig workers as employees rather than independent contractors. The law was purportedly aimed at correcting widespread misclassification and thus granting gig workers employment protections and benefits, such as minimum wage, overtime pay, and sick leave.
The Legal Battle Over AB5 and Prop 22
How gig workers are paid and treated has been a hotly contested issue in California, with lawmakers, labor advocates, and gig companies locked in a legal battle over how to classify gig workers. In 2019, California passed AB5, a law that aimed to reclassify nearly all gig workers as employees, which would have entitled them to benefits and protections that come with employment, including minimum wage, overtime pay, and sick leave.
The law went into effect in January 2020, but gig companies pushed back hard against the law, arguing that it would upend their business model and force them to lay off workers.
The Appellate Court's Decision: A Major Win for Gig Companies
To fight AB5, these companies sponsored Prop 22, a ballot measure that exempted them from the law and allowed them to continue classifying their drivers as independent contractors. The measure passed in November 2020 with the support of over 58% of California voters. However, the following year, a state judge ruled that Prop 22 was unconstitutional, arguing that it violated the state constitution's requirement that ballot measures address only one issue at a time.
Now, the appellate court has overturned that ruling, arguing that Prop 22 is constitutional and doesn’t violate the state constitution. The court's decision is a major victory for digital platforms that have argued that the law would force them to raise prices, lay off workers, and reduce services. It’s also a major blow to labor advocates, who argue that gig workers are misclassified.
The Implications of the Decision for Gig Workers
So, what does this decision mean for gig workers subject to Prop 22 in California? In the short term, it means that drivers for these companies will continue to be classified as independent contractors. In addition, Prop 22 provides some protections for gig workers, such as a minimum earnings guarantee, a healthcare stipend, and occupational accident insurance.
The Future of the Gig Economy: What Comes Next?
In the long run, the decision could have far-reaching implications for the gig economy as a whole. The industry has exploded in recent years, with millions of workers across the country relying on contract work from the gig economy for income. However, the nature of gig work has raised questions about whether gig workers should be classified as employees or independent contractors.
The Bottom Line
The California court's decision to reinstate Prop 22 could set a precedent for other states and countries grappling with the same issue. If Prop 22 is deemed to be constitutional and the state legislature changes its employment laws to classify gig workers as employees, it could create a new market norm for the rest of the country. Stay on top of the latest Marketplace Risk news by subscribing to our weekly newsletter.