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May 22, 2024

California Supreme Court Weighs Legality of Prop 22: Implications for Uber and Lyft Drivers

On Tuesday, California’s highest court delved into a contentious legal debate that could reshape the future of app-based ride services like Uber and Lyft. The seven-member California Supreme Court held oral arguments in San Francisco to consider the constitutionality of Proposition 22 (Prop 22), a ballot measure passed in 2020 that allows these companies to classify drivers as independent contractors rather than employees.

Background on Proposition 22

Prop 22 emerged in response to a 2019 state law tightening the criteria for classifying workers as contractors. Uber, Lyft, and other app-based service companies invested over $200 million to promote Prop 22, arguing that without it, increased costs from reclassifying drivers as employees could force them to halt operations in California, the nation’s most populous state.

Passed with nearly 60% voter approval, Prop 22 permits app-based transportation services to designate drivers as independent contractors, provided they are paid at least 120% of the minimum wage while on the job and receive certain reimbursements and health insurance subsidies. This measure exempts these drivers from employee benefits such as minimum wage, overtime pay, and expense reimbursements, reducing company costs by up to 30%, according to various studies.

The Legal Challenge

The Service Employees International Union (SEIU) and four drivers challenged Prop 22’s constitutionality, arguing it infringes on the legislature’s exclusive power to regulate workers’ compensation. Last year, a lower court dismissed SEIU’s claims, affirming Prop 22’s validity. The current Supreme Court case hinges on whether the state constitution indeed reserves exclusive regulatory power over workers’ compensation to the legislature, or if it can be shared with the electorate through ballot measures.

Courtroom Dynamics

During Tuesday’s session, several justices indicated that California’s constitution might require the legislature to share lawmaking authority with voters, similar to how legislative bills must be approved by the governor. Justice Goodwin Liu pointed out that while Prop 22 addresses worker classification under the labor code, it does not immobilize the labor code itself, suggesting legislative flexibility.

SEIU’s attorney, Scott Kronland, countered that Prop 22’s clause preventing amendments complicates legislative efforts to extend employee-like benefits to app-based drivers. Meanwhile, some justices were skeptical of arguments from Protect App-Based Drivers and Services, an industry group defending Prop 22. Justice Joshua Groban noted the troubling possibility of voters potentially dismantling the workers’ compensation system entirely, which would contradict the constitution’s provision of plenary power to the legislature.

Broader Implications and Nationwide Trends

California’s legal struggle is part of a broader national debate on the status of gig workers. Recently, Minnesota’s legislature passed a law establishing a minimum wage for gig drivers, prompting threats from Uber and Lyft to cease operations in Minneapolis. Similarly, Massachusetts is witnessing its own legal battles over gig worker classification, including a lawsuit from the state attorney general against Uber and Lyft for allegedly misclassifying drivers to circumvent employee benefits.

What’s Next?

The California Supreme Court is expected to issue a ruling within 90 days of the hearing. The outcome will significantly impact not only the gig economy in California but also set a precedent for other states grappling with similar issues.

As this case unfolds, it highlights the evolving legal landscape surrounding gig workers and the ongoing tug-of-war between cost-saving business models and worker rights. The decision will reverberate across the country, influencing how states balance innovation with labor protections in the digital age.

Jhumpa Lahiri

Jhumpa Lahiri

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