On July 25, 2024, the California Supreme Court upheld Proposition 22 (“Prop. 22”) in a major win for gig-economy companies Uber, Lyft and DoorDash. This ruling marks the end of a multi-year legal battle over Prop. 22 raised by a group of drivers and a major labor union that challenged Prop. 22 as unconstitutional, arguing that it interferes with lawmakers’ authority over matters of workers’ compensation.
Industry estimates are that Prop. 22 affects more than 1.4 million Californians who are app-based gig workers for companies such as Uber, Lyft, DoorDash and Instacart.
Prop. 22 carves out a new classification for gig workers that entitles them to some limited benefits but strips them of the full-array of benefits afforded to employees. Prop. 22 allows app-based companies to treat their drivers and delivery workers as independent contractors rather than employees. As independent contractors, the workers are ineligible for workers’ comp benefits, including overtime, sick pay, a minimum wage for all time worked, unemployment insurance and more.
Prop. 22 does offer some protections to gig workers, promising guaranteed minimum earnings of 120% of minimum wage, health care stipends, occupational accident insurance and accidental death insurance. However, these benefits come with limitations. The guaranteed minimum earnings of 120% of minimum wage does not include time spent waiting for a ride or delivery, only for time spent on a “gig;” the health care stipends are only for certain eligible workers, excluding those who qualify for public assistance; and the occupational accident insurance is limited to $1 million. Also, while gig workers are reimbursed for their mileage, they receive reimbursement at a rate lower than the IRS-mandated rate that employees would receive (35 cents per mile for a gig worker vs. 67 cents per mile per an employee). Further, the reimbursement amount is included in the minimum earnings guarantee, not in addition to it.
The Supreme Court held that Prop. 22 was constitutional, finding that it does not necessarily prevent workers from receiving workers’ compensation and it does not block legislators from deciding that independent contractors are eligible for workers’ compensation.
Labor groups have criticized the decision. Lorena Gonzalez, the President of the California Federation of Labor Unions, stated: “We are deeply disappointed that the state Supreme Court has allowed tech corporations to buy their way out of basic labor laws despite Proposition 22’s inconsistencies with our state constitution . . . These companies have upended our social contract, forcing workers and the public to take on the inherent risk created by this work, while they profit.” April Verrett, president of SEIU, stated: “While today’s California Supreme Court decision is disappointing, Uber and Lyft drivers in the state refuse to back down from their fight to win union rights and bring these companies to the bargaining table.”
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