California court strikes down State law enabling gig-workers

Published : August 21, 2021 19:54 IST

Companies like Uber and Lyft say most drivers support the contractor model. Photo: Reuters

A judge in California ruled an Uber-backed gig-worker initiative was unconstitutional. The ride-hailing company pledged to challenge the decision.

A 2020 referendum passed by California's voters exempting "gig workers" from a state labor law was unconstitutional, a judge ruled on August 20, dealing a major blow to the state's gig economy. The legislation, known as Proposition 22, allowed app-based food delivery and ride-hail drivers to be treated as independent contractors rather than employees.

It was heavily backed by gig economy companies such as Uber, Lyft, Doordash and Instacart, and effectively overturned a state law requiring them to reclassify their drivers and provide employee benefits. However, Alameda County Superior Court Judge Frank Roesch struck down the vote, saying it infringed on the legislature's power to set workplace standards.

"It limits the power of a future legislature to define app-based drivers as workers subject to workers' compensation law," making the entire measure unenforceable, the judge wrote.

What is Prop 22?

The measure allows app-based ride-hail drivers to remain independent contractors, but companies were to pay them a number of benefits including a minimum wage, a contribution to health care, and other forms of insurance.

Critics say that Prop 22 failed to take into account the full costs borne by drivers. The measure also designates drivers as self-employed, meaning they do not have the right to some regular employee benefits such as collective bargaining.

Companies like Uber and Lyft say most drivers support the contractor model as they use their own cars and chose their own work schedules — what they describe as cherished independence.

Uber, others pledge to appeal

Uber criticized the decision and vowed to challenge it. "This ruling ignores the will of the overwhelming majority of California voters and defies both logic and the law," the company said in a statement. "We will file an immediate appeal and are confident the Appellate Court will uphold Prop 22," a group supporting the measure, the Protect App-Based Drivers and Services Coalition.

But many workers welcomed the ruling as an opportunity to fight for better treatment. "Prop 22 has always been an illegal corporate power grab that not only stole the wages, benefits, and rights owed to gig workers but also ended the regulating power of our elected officials," said Gig Workers Rising, which advocates for more benefits.

November referendum

Gig economy companies scored a victory in November when a majority of California's voters backed the company-sponsored Prop 22, overwriting state law that would have made them employees. The vote came after a contentious campaign where labor groups criticized the initiative saying it would erode worker rights and benefits.

Supporters of the measure argued that it offered a new, flexible economic model that has given millions of people the convenience of ordering food or a ride with the push of a button. The outcome was expected to echo across the United States, in a boon for app-based services while igniting fears that big business is rewriting labor laws.

adi/sms (AFP, Reuters)

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