- By Annabelle Liang
- Business reporter
A US court has ruled that giants of the “gig” economy including Uber and Lyft can continue to treat their workers as independent contractors in the state of California.
Labor groups and some workers opposed the move, saying it robbed them of rights such as sick leave.
The companies say the proposition protects other benefits such as flexibility.
The latest decision overturns a decision made by a lower court in California in 2021, which found that Proposition 22 affected the powers of lawmakers to set workplace standards.
The state of California and a group representing Uber, Lyft and other companies appealed against the decision.
On Monday, a three-judge panel of the appeals court ruled that the workers could be considered independent contractors. But it removed a clause, which placed restrictions on collective bargaining among workers, from Proposition 22.
Shares of Uber and Lyft were nearly 5% higher in after-hours trading.
“Today’s decision is a victory for app-based workers and the millions of Californians who voted for Prop 22,” said Tony West, Uber’s chief legal officer.
“We are pleased that the court respected the will of the people and that Prop 22 will remain in place, preserving the freedom of drivers,” added Mr West.
Lyft said the proposal “protects drivers’ value of independence and provides them with new, historic benefits.”
The Service Employees International Union, which has challenged the constitutionality of Proposition 22 among many drivers, said it is considering an appeal against the court’s decision.
In November 2020, California voters passed Proposition 22 allowing freelance workers to be classified as independent contractors.
It was a victory for Uber and Lyft who ran a $205m (£168.7m) campaign to support the measure.
Some drivers supported Proposition 22 but other drivers and labor groups opposed it, pointing to all the benefits of classified employees including sick days, vacation and overtime pay.
Tens of millions of people work in the global gig economy in services such as food delivery and transportation.
Gig workers are paid for individual tasks, such as delivering food or car rides, rather than earning a regular salary.
Most US federal and state labor laws, such as those requiring a minimum wage or overtime pay, do not apply to gig workers.
Companies like Uber and Lyft are coming under increased scrutiny as the industry grows.
