- By Annabelle Liang
- Business Correspondent
A US court has ruled that “gig” economy giants 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 would take away rights such as sick leave.
The companies say the proposal preserves other benefits, such as flexibility.
The latest ruling overturns a 2021 decision by a lower court in California that found Proposition 22 affected lawmakers’ powers to set workplace standards.
The state of California and a group representing Uber, Lyft and other companies appealed the decision.
On Monday, a three-judge panel of the appeals court ruled that workers can be considered independent contractors. However, a clause restricting workers’ collective bargaining was removed from Proposition 22.
Shares of Uber and Lyft were nearly 5% higher in after-hours trading.
“Today’s ruling 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 has respected the will of the people and that Prop 22 will remain in place, protecting the freedom of drivers,” Mr West added.
Lyft said the proposal “protects the value of independent drivers and gives them new, historic benefits.”
The Service Employees International Union, which challenged the constitutionality of Proposition 22 along with several other drivers, said it would consider appealing the court’s ruling.
In November 2020, voters in California passed Proposition 22, which allowed freelance workers to be classified as independent contractors.
It’s a win for Uber and Lyft, who campaigned for $205m (£168.7m) in support of the move.
Some drivers supported Proposition 22, but other drivers and labor groups opposed it, pointing to all the benefits of being classified as employees, including sick days, vacation and overtime pay.
Tens of thousands of people work in the global gig economy in services such as food delivery and transportation.
Gig workers are paid for personal tasks such as food delivery or car rides instead of regular wages.
Most US federal and state labor laws, such as minimum wage or overtime pay, do not apply to gig workers.
Companies like Uber and Lyft have come under increased scrutiny as the industry grows in size.