The gig economy has been a hot topic of debate in recent years, with California’s supreme court recently upholding a landmark ruling that allows gig economy companies to treat their workers as independent contractors. This decision, which comes as a big victory for companies like Uber, has significant implications for the future of the gig economy and the rights of workers.
The ruling is a blow to labour rights groups that have long sought to overturn a controversial law known as Proposition 22. This law, which was passed by California voters in 2020, allows gig economy companies to classify their workers as independent contractors rather than employees. This exemption from a new state law that would have classified workers as employees gives workers limited healthcare benefits and a minimum earnings guarantee.
Uber, one of the companies that campaigned aggressively in support of Proposition 22, hailed the court’s decision as a confirmation of the will of the nearly 10 million Californians who voted in favor of the law. The company argued that treating workers as employees would pose an existential threat to their businesses and lead to significant price increases for riders.
The gig economy companies, including Uber and Lyft, have long maintained that reclassifying drivers as employees would result in significant additional expenses and could lead to drivers leaving the platforms due to strict work contracts and a loss of flexibility. The companies argued that drivers’ freedom to work when and how they want is a fundamental aspect of the gig economy model.
Before the ruling, analysts estimated that a repeal of Proposition 22 would have resulted in substantial additional costs for companies like Lyft, DoorDash, and Uber. These costs could have been offset in part through higher fees, but this could have also reduced demand for their services.
The supreme court’s decision marks the final stage of a years-long legal battle in California courts by individual drivers and the Service Employees International Union seeking to overturn Proposition 22. Uber and Lyft also recently settled a lawsuit in Massachusetts over the classification of drivers as employees or independent contractors, agreeing to pay a combined $175 million and granting drivers benefits such as limited healthcare and a minimum earnings guarantee.
Overall, the court’s decision to uphold Proposition 22 is a significant victory for gig economy companies and a blow to labour rights groups. The future of the gig economy in California and beyond will be shaped by this ruling, as companies continue to navigate the balance between flexibility for workers and the costs associated with treating them as employees. Stay informed with free updates on this evolving issue by signing up for the Gig Economy myFT Digest delivered directly to your inbox.
