California Court Mostly Upholds Prop. 22 in Win for Uber and Other Gig Companies

The Service Employees International Union condemned the decision.

“Every California voter should be concerned about corporations’ growing influence in our democracy and their ability to spend millions of dollars to deceive voters and buy themselves laws,” David Huerta, the president of S.E.I.U. California, said in a statement.

Jon Streeter, one of the three appeals court judges, disagreed with large parts of the 63-page ruling of his colleagues, Tracie Brown and Stuart Pollak. In a 64-page dissent, Justice Streeter wrote that all of Proposition 22 should be thrown out, in large part because of its clause limiting the legislature’s authority over workers’ compensation for gig drivers.

“I would affirm the judgment, but I prefer to go further. I believe we must invalidate Proposition 22 in its entirety,” Justice Streeter wrote. He added that the definition of independent contractors used in the measure was “constitutionally infirm.”

Uber and other companies have long argued that drivers value the flexibility of being an independent contractor without set hours from an employer, and say they would have to give up that freedom if they were made employees. Labor activists reply that drivers are exploited, deserve better health care and employment benefits and could maintain their flexibility under a traditional employment model.

Gig companies spent more than $200 million pushing for Proposition 22, which gave gig workers limited benefits but exempted them from Assembly Bill 5, a law passed by the California Legislature in 2019 that set a new standard for determining whether workers should be considered employees under the law.

If A.B. 5, which is facing its own legal challenge, is ever applied to gig drivers, Uber and other companies could be found to be improperly treating those drivers as independent contractors rather than as employees.

As a result, gig companies would have to adjust their business models at the cost of several hundred million dollars per year, either by giving drivers further independence or — more likely — converting some number of them into employees, possibly of a third-party vehicle fleet operator that would use Uber’s and Lyft’s platforms.