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Court Upholds Prop. 22 in Big Win for Gig Firms Like Lyft and Uber

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Protesters stand on a sidewalk in front of an office, and next to a car with Lyft and Uber stickers on the back. A woman holds a sign that says: Uber: 'Pay Drivers a Living Wage.'
A supporter of ride-hail drivers holds a sign during a protest in front of Uber headquarters in May 2019. Prop. 22, backed by huge amounts of cash from gig companies, would create a new class of worker in California. (Justin Sullivan/Getty Images)

In the winding story of California’s gig-worker laws, another chapter has come to a close.

Justices in a California court of appeals on Monday ruled that Proposition 22 — a 2020 ballot measure that allowed Uber, Lyft and other "gig" companies to classify their workers as independent contractors rather than employees — is largely constitutional.

The distinction between employees and contractors is important: Unlike independent contractors, employees have the right to a host of benefits and protections like minimum wage, sick leave and family leave, unemployment and disability benefits, and more.

The three court of appeals judges in San Francisco, who heard oral arguments in the case in December, disagreed with two of the three points of a lower court's ruling that had largely invalidated Prop. 22.

But the judges on Monday did agree with the lower court that a clause in the measure — requiring collective bargaining to occur through an amendment to the proposition — “violates separation of powers principles,” and ordered it be removed.

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Even so, the appeals court ruling leaves most of Prop. 22 intact.

Supporters of the measure were quick to celebrate the decision, with the Protect App-Based Drivers and Services coalition, which includes Uber, Lyft, DoorDash and Instacart, calling it “a victory for the nearly 1.4 million drivers” in California.

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“Voters knew what they were voting on,” said Jennifer Barrera, president of the California Chamber of Commerce. “They wanted to maintain the flexibility for these gig workers and provide them the opportunity to do this work. And I think that’s ultimately what the judge did — is to uphold that flexibility.”

But while this chapter has drawn to a close, the story probably isn’t over. The Service Employees International Union is challenging the constitutionality of the measure and may appeal the ruling.

“Drivers have always led this movement, and we will follow their lead as we consider all options — including seeking review from the [California] Supreme Court — to ensure that gig drivers and delivery workers have access to the same rights and protections afforded to other workers in California,” Tia Orr, executive director of SEIU California, said in a statement.

Lorena Gonzalez Fletcher, executive secretary-treasurer of the California Labor Federation, an umbrella organization for labor unions, which opposed Prop. 22, lambasted the ruling.

“Today the Appeals Court chose to stand with powerful corporations over working people, allowing companies to buy their way out of our state’s labor laws and undermine our state constitution,” she said in a statement. “Our system is broken. It would be an understatement to say we are disappointed by this decision.”

In an interview earlier this month, UC Berkeley Law professor Catherine Fisk said she’d be “stunned” if whichever side lost didn’t appeal the decision.

“There’s just too much money at stake — for both sides,” she said.

The judicial system moves slowly, so it could be months before the California Supreme Court decides on whether or not to hear an appeal.

The case has ramifications beyond this initiative, said Kurt Oneto, an attorney with Nielsen Merksamer, the firm representing the coalition of gig companies, and is defending the ballot measure in court.

The challenges to the initiative “would drastically undercut and restrain the initiative power of California voters,” he told CalMatters earlier this year.

But ultimately at stake are the kinds of pay, benefits and legal protections that drivers are entitled to, said Stacey Leyton, attorney with Altshuler Berzon, the law firm representing SEIU and workers in challenging the ballot measure.

But the effects will extend beyond drivers, she said.

“When companies exploit their workers and misclassify their workers, it has the effect of harming all workers,” said Leyton.

How did we get here?

California’s battle over the classification of workers began in 2018, when the state Supreme Court issued a ruling that established a new standard for who can be counted as an independent contractor. That decision spurred a new state law that classified workers in many sectors — including truckers, commercial janitors, nail salon workers, physical therapists and gig economy workers — as employees.

After failing to get the ride-share industry exempted from the new law, Uber and Lyft upped the ante, threatening to write a ballot measure to do so unless they could negotiate another deal. They argued that changing the employment status of drivers would reduce workers’ flexibility and “pose a risk to our businesses.”

In 2020, the companies forged ahead with Prop. 22, which became a pitched battle between labor and business, breaking state campaign finance records in the process.

In addition to classifying workers as independent contractors, the measure offered gig workers certain incentives, in lieu of standard employee benefits, including 120% of minimum wage for “active” driving time (but not time waiting), a partial health care subsidy for those who clocked enough hours per week, and on-the-job injury coverage.

The measure passed with 58% of the vote in November 2020.

Shortly after Prop. 22 passed, SEIU and a group of drivers mounted a legal challenge, arguing that it violated California’s constitution. Their case was eventually heard by a judge in Alameda County Superior Court, who in 2021 struck down Prop. 22 (PDF) as unconstitutional. But attorneys representing the state and the coalition representing gig companies appealed that decision, sending it to the appeals court.

What's happened since Prop. 22 went into effect

What has changed — for better or worse — since the measure took effect depends somewhat on who you ask.

Jose Pineda, a driver for DoorDash in Northridge who was referred to CalMatters by the industry coalition, says his hourly pay has increased from about $23–$25 (before costs) to $27–$30. After switching from Medi-Cal to an insurance plan through Covered California, he receives a health stipend of about $75 every two weeks, he said. He supported Prop. 22, and said, “I think it’s good. I think we need it. I mean, what else is out there?”

Contrast that with the experience of Daryush Khodadadi-Mobarakeh, who was referred to CalMatters by SEIU. Khodadadi-Mobarakeh, who drives 35 to 40 hours a week for several companies, including Uber, Lyft and DoorDash, and is a leader with the California Gig Workers Union, said his pay has consistently decreased since he began working in 2014, and particularly after Prop. 22 went into effect.

Now it takes him about 12 hours to make the same amount he used to earn in eight hours before Prop. 22, he said.

How drivers’ wages have been affected by Prop. 22 depends in part on how working hours and expenses are calculated (and who's doing the research). A study paid for by the industry coalition and conducted by researchers at UC Riverside found that in late 2021, drivers for DoorDash, Instacart, Lyft and Uber earned $34.46 in gross pay per hour of “engaged” time — the time between accepting a ride or delivery and dropping off the order or rider. That was up from $27.34 in late 2019, before the measure passed. Those wages don’t account for the time workers spend waiting between rides, or costs like fuel, car maintenance and insurance.

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But a study of Uber and Lyft drivers conducted by National Equity Atlas, in partnership with Rideshare Drivers United, which opposed Prop. 22, found that drivers on average earned $26.30 in gross wages per hour in late 2021. But the study then calculated the cost of employee benefits that gig workers don't receive — including reimbursement for total miles driven and employer contributions to programs including Social Security, Medicare, unemployment insurance and paid sick time. When figured into the equation, drivers' net wages dropped to $6.20 per hour, the study found.

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