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<\/div>\nUber Technologies Inc. and Lyft Inc. can keep classifying California drivers as independent contractors, after the state\u2019s top court said a company-backed law passed by voters doesn\u2019t wrongly curtail the legislature\u2019s power over worker protections.<\/p>\n
The unanimous ruling upholding California\u2019s Proposition 22 was released Thursday.<\/p>\n
The favorable ruling for the gig economy companies removes what investors regarded as a major regulatory overhang. Had the judge ruled to invalidate Prop 22, the companies would have faced the threat of millions of dollars in additional cost to pay drivers if they were to be reclassified as employees, upending their business models and potentially raising user costs in one of their biggest US markets.<\/p>\n
Related: Uber Loses Challenge to California Gig Work Law in Appeals Court<\/a><\/strong><\/p>\n Shares of Uber, Lyft, DoorDash and Instacart all spiked on the news. Lyft saw the biggest gain, with a 7.4% jump in share price.<\/p>\n Justice Goodwin H. Liu in May oral arguments said the law doesn\u2019t necessarily preclude workers from ever receiving workers\u2019 compensation, a system to help workers injured on the job that the state legislature has constitutional power to oversee. The case was brought specifically over the constitutionality of this provision, but Liu said the law doesn\u2019t block legislators from deciding that independent contractors are eligible for workers\u2019 compensation.<\/p>\n California\u2019s constitution doesn\u2019t bar voters from passing legislative initiatives on matters impacting workers\u2019 compensation, Liu wrote Thursday.<\/p>\n Related: California Court to Weigh Fate of Law Treating App-Based Drivers as Contractors<\/a><\/strong><\/p>\n \u201cIt would unduly restrict the initiative power to give the Legislature what would essentially be a first-mover advantage, precluding the electorate from undoing any action the Legislature takes pursuant to\u201d the workers\u2019 compensation system, Liu wrote.<\/p>\n The ruling is a win for the industry as gig companies like Uber, Lyft, and DoorDash Inc. poured more than $200 million into their 2020 campaign to preserve the core of their business models and keep drivers classified as independent contractors.<\/p>\n Meanwhile, drivers and unions argued that the law improperly shifts the cost of doing business onto gig workers and denies them other protections, such as minimum wage, sick leave, and overtime pay.<\/p>\n Passenger app drivers make a median wage of about $5.97 per hour without tips in California when factoring all work time, gas, and vehicle weathering, according to a May University of California at Berkeley study.<\/p>\n It\u2019s not the first time this term the California Supreme Court has weighed in on the extent of California\u2019s uniquely expansive right for voters to pass new laws and amend existing ones.<\/p>\n The state top court in June blocked a ballot measure that would have asked voters to make new state and local taxes harder to enact. The measure would have revised the state constitution, which is beyond the power of voters, the opinion said.<\/p>\n The court ruling affirms \u201cthe will of the nearly 10 million Californians who voted to deliver historic benefits and protections to drivers, while protecting their independence,\u201d Uber said in a statement.<\/p>\n \u201cWhether drivers or couriers choose to earn just a few hours a week or more, their freedom to work when and how they want is now firmly etched into California law, putting an end to misguided attempts to force them into an employment model that they overwhelmingly do not want.\u201d<\/p>\n Liz Jarvis-Shean, DoorDash\u2019s vice president of communications and policy said in a statement, \u201cThis decision is a huge victory for California Dashers and voters \u2013 Prop 22 is here to stay.\u201d<\/p>\n Olson Remcho LLP and Altshuler Berzon LLP represent Castellanos. O\u2019Melveny & Myers LLP and Nielsen Merksamer Parrinello Gross & Leoni LLP represent Protect App-Based Drivers and Services.<\/p>\n The case is Castellanos v. California, Cal., No. S279622, 7\/25\/24.<\/p>\n Top photo: A DoorDash worker in San Francisco. Photographer: David Paul Morris\/Bloomberg.<\/em><\/p>\n Topics<\/span> California<\/a> <\/p>\n<\/p><\/div>\n Was this article valuable?<\/p>\n<\/p><\/div>\n