On Monday, March 13, this year, a state appeals court in California ruled that app-based companies that provide rideshare and delivery driver services will be allowed to continue to treat their drivers in that state as Uber independent contractors and Lyft independent contractors, rather than Uber employees and Lyft employees.
The decision lets tech giants like Uber, Lyft and DoorDash bypass certain state laws that mandate protections for workers and employee benefits by supporting Proposition 22, which was approved by California voters in 2020. When it comes to Uber employees or Lyft employees who work at the companies' headquarters, for example, these state laws must be upheld, but not so for independent contractors who do work for them.
59% of California voters passed this ballot initiative that allowed transportation and delivery companies that function on app-based platforms to be exempt from legislation by allowing them to classify Uber rideshare drivers, for example, as independent contractors. This meant that these ride share companies are not required to provide employee benefits such as paid sick leave, extra pay for overtime work, health insurance provided by the employer and unemployment insurance.
This has essentially been Uber's policy and Lyft's policy, as well as that of other companies from the beginning, but this Uber/Lyft news solidifies Prop 22.
What Prop 22 does provide drivers is:
Proposition 22 is not only for delivery drivers and those who drive for ride share companies, it applies to many other industries. But it had by far the biggest impact on these app-based ride-hailing and delivery companies, such as Uber, Lyft and Doordash because their business model is built on contracting with drivers who use their own cars to provide customers with rides and to deliver goods.
In 2021, a lower court in California ruled that Proposition 22 was illegal, but this recent decision overturns that one.
Monday's ruling defeats the efforts of labor unions, who advocated for companies like Uber and Lyft to treat Uber ride share drivers and Lyft ride share drivers as employees. This would have changed Uber policy and Lyft policy regarding drivers by force, giving all ride-hail drivers and other gig-economy workers the classification of "employee."
But this decision meant that ride-hail and delivery companies were able to prove that Uber ride share workers, for example, do not receive direction or otherwise controlled by the companies while they are working. The companies were also able to show that drivers' work is not the core business of the company, that each worker has their own business doing that same kind of work, and their work for a given company is just a part of that – all of which makes them technically Uber independent contractors, Lyft independent contractors or independent contractor delivery drivers.
What labor unions did get out of the decision is the ability for drivers to join labor unions. Ride-hail and delivery companies cannot prevent drivers from collectively bargaining for better working conditions and hold hold companies accountable for providing workers with what they are entitled to according to the legislation.
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