(Reuters) — The California Supreme Court Thursday upheld a measure approved by voters allowing app-based services such as Uber and Lyft to consider drivers independent contractors rather than employees entitled to greater benefits.
The ruling is a major victory for the ride-hailing industry, which has said that many companies would end or limit service in the state if they were forced to treat thousands of drivers as their employees.
The court dismissed a lawsuit by the Service Employees International Union (SEIU) and four drivers who say the 2020 ballot measure known as Proposition 22, which preserves drivers’ contractor status while granting them some benefits, was unconstitutional.
Uber said in a statement that the ruling upheld “the will of the nearly 10 million Californians who voted to deliver historic benefits and protections to drivers, while protecting their independence.”
SEIU California Executive Director Tia Orr said the union was disappointed by the ruling but that ride-share drivers could continue to fight for their rights by seeking to unionize.
“Gig workers are determined to ensure fairness in the gig economy and won’t stop fighting to win greater workplace rights and protections on the job,” she said.
Whether gig workers should be treated as employees or contractors is a crucial issue for the ride-share industry. Employees are entitled to minimum wage, overtime pay, reimbursements for expenses and other protections that do not extend to independent contractors, who can cost companies up to 30% less, according to several studies.
Uber, Lyft and other app-based services spent more than $200 million on a campaign to pass Prop 22, which they say allows drivers to continue earning money while enjoying the flexibility of part-time gig work.