On Tuesday, May 21, 2024, judges in California’s highest court faced the prospect of giving voters the authority to allow app-based drivers such as Uber and Lyft to classify drivers in the state as independent contractors. 

This verdict would mean that drivers would not be considered workers and would have greater benefits than independent contractors.

The Supreme Court in California convened to hear arguments regarding a complaint filed by the Service Employees International Union. 

The union complained that Proposition 22, a ballot measure passed in 2020, was deemed unconstitutional. Four drivers also filed this complaint. 

Back in 2020, there was a measure that saw the exemption of app-based from a state law which was passed in 2019. This puts a limit on drivers being classified as contractors. 

The exemption is crucial to ride service companies. It impacts the cost of evaluations and driver management strategies. 

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The Union supports employees’ receiving benefits like minimum wage, reimbursements, overtime payments, and other benefits that come with being a worker. 

However, all these benefits are not extended to independent contractors. This even enables cost savings for companies. This is compared to being a direct worker. 

Some service industry riders in California supported Proposition 22 with over $200 million. Ride service industry members include Uber, Lyft, and other app-based driver services. 

These companies opined that proposition 22 needs to be passed for them to continue operating in California, or else they’ll be forced to cease operations. 

Proposition 22 was passed in November 2020. It was a success because almost 60% of Californians voted for it. Afterward, app-based drivers were classified as independent contractors. 

This order was made with the understanding that contractors would be paid 120% of the minimum wage once passengers were present, and it also covers expenditures and health insurance benefits.

In 2023, the Service Employees International Union tried to challenge Proposition 22 at a lower appeal court. They argued that it restricted legislative authority regarding state worker compensation. 

They argued that the benefits stated by Proposition 22 were not duly followed. They said drivers were denied the benefits and they were reserved for it only for employees. 

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According to three Supreme Court judges, California’s constitution requires power sharing between the legislature and the public to enact law. 

To explain the sharing of power, it means that bills must be presented to the governor before they can be made into law, potentially allowing for the passage of laws to extend benefits to members of the ride service industry.

Justice Goodwin Liu highlighted Proposition 22 during the proceedings. He said Proposition 22 classified individuals as employees or independent contractors within the labor code. 

However, he suggested that proposition 22 could be changed through an alternative method. Liu indicated that the labor code is subject to change and not static.

This statement made by Liu did not reassure Scott Kronland, the lawyer for the Service Employees International Union, who addressed the court and suggested that provisions to Prop 22 may be made.

Kronland said that if a provision prohibited revisions to Prop 22, lawmakers would have difficulty repealing the initiative.

It’s not just California that’s facing legal hurdles regarding the classification and rights of app-based drivers and contract workers.

Recently, a new measure was approved in Minnesota to override the higher minimum wage in Minneapolis. This new measure creates a wage for app-based drivers at $1.28 per mile and 31 cents per minute. 

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In California and Minneapolis, Uber, Lyft, and other app-based driving companies have threatened to halt operations in those states. 

Also, in Massachusetts, the Supreme Court recently heard arguments about a potential vote similar to California’s on the relationship between app-based companies and drivers. 

As it stands, the situation of things between app-based drivers and the ride service industry remains unresolved. 

However, with the most recent verdicts in California expected within the next 90 days, it remains to be observed if app-based drivers will receive a good outcome or if the ride-service business will pose additional risks to the service in the state.

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