Uber and Lyft shares rise after California court upholds Proposition 22

  • In November 2020, California voters approved Proposition 22, which allowed ride-sharing apps like Uber and Lyft to classify their drivers as independent contractors, limiting the companies’ obligation to provide certain benefits.
  • A group of drivers challenged the proposal, and in 2021 a judge declared it unconstitutional.
  • But on Monday, an appeals court overturned that ruling, allowing the prop. 22 to stand.

Ride-sharing apps, including Uber and Lyft, can continue to treat their drivers as independent contractors, a California appeals court ruled Monday, reversing a lower court ruling that barred them from doing so.

In November 2020, California voters approved Proposition 22, which allowed ride-sharing and delivery app makers to classify their drivers as independent contractors. A California judge ruled the proposal unconstitutional in 2021, arguing that it violated the legislature’s power to set workplace standards. The state and a group representing businesses and other parties appealed the ruling, and Monday’s ruling was in their favor.

Shares of ridesharing and delivery companies rose on the news, with Uber, Lyft and Doordash posting gains of more than 4% after hours.

Enforcement worker Jesus Barra stands on his car during a protest outside Los Angeles City Hall to urge voters to vote no on Proposition 22, a November ballot measure that would classify drivers based on the application as independent contractors and not as employees or agents, in Los Angeles, California, USA, 8 October 2020.

Mike Blake | Reuters

Prop. 22 created a set of criteria that determined whether rideshare drivers were employees or independent contractors > In practice, it exempted Uber and similar companies from following certain minimum wage, overtime, or workers’ compensation laws for hundreds of thousands of California carpool drivers. . Instead, the ballot measure required companies to provide compensation and healthcare “subsidies” based on “committed” driving time, along with other benefits including safety training and sexual harassment training.

It was the most expensive poll in California history, with ride-sharing companies contributing more than $181 million to the “Yes” campaign. The companies reportedly acted aggressively to get their drivers to support the initiative, which passed with 58.6% of votes in favor.

A group of rideshare drivers sought to overturn Proposition 22 and won a lower court ruling. But in a 63-page opinion released Monday, California 1st District Court of Appeals judges disagreed with that court and upheld the proposal.

“Proposition 22 does not impinge on the workers’ compensation authority of the Legislative Assembly or violate the single subject rule,” the opinion read.

“Today’s decision is a victory for app-based workers and the millions of Californians who voted for Prop 22. Across the state, drivers and couriers said they were pleased with Prop 22, which provides them with new benefits while preserving the app’s unique work-based flexibility,” Uber Chief Legal Officer Tony West said in a statement.

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