Emboldened by a California election victory that kept its drivers independent last year, gig economy companies like Uber and Lyft have in recent months accelerated the momentum of what they call a “third way” of work, a classification Self Employed Receiving Limited Benefits Without Obtaining Employee Status.
But that plan was overturned Friday night by a California judge who ruled that the ballot initiative backed by Uber, Lyft, DoorDash and other companies called the gig economy violated the state Constitution. It was a potential setback for companies and a victory for labor organizers and drivers who argue they are being treated unfairly.
Here is an explanation of this long fight and what happens next:
Was this problem not resolved in California?
Uber and Lyft have long said their drivers are independent contractors, allowing companies to avoid the costs of health insurance, unemployment insurance, sick leave and other job benefits.
However, some state legislatures, federal officials and legal experts have argued that drivers are employed under the law, and that Uber and other concert companies owe them the full protection that comes with employment.
In 2019, California lawmakers passed a law that requires companies like Uber to employ their drivers. The state attorney general sued Uber and Lyft to enforce the law, and the companies responded by threatening to leave the state.
Uber, Lyft and DoorDash invested more than $ 200 million in a ballot measure, known as Proposition 22, that would allow drivers to remain independent contractors, while the companies offered them limited benefits. Prop. 22 passed in November with approximately 59 percent of the vote.
A coalition of transportation drivers and labor groups went south in January, arguing that Proposition 22 is unconstitutional. A month later, The California Supreme Court refused to hear the case, seemingly ending the challenge. But the group resubmitted its petition in a lower court, leading to last week’s ruling.
Why did the judge find Prop. 22 unconstitutional?
The decision of Judge Frank Roesch of the Superior Court of California in Alameda County had three main conclusions.
The first was that Prop. 22 separated workers from the pool of employees eligible for workers’ compensation in the event of an injury or other incident in the workplace. But the State Legislature has the right, under the California Constitution, to establish and control workers’ compensation.
Judge Roesch wrote in his decision that Prop. 22 “limits the power of a future legislature to define app-based drivers as workers subject to workers’ compensation law” and is therefore unconstitutional.
Second, Prop. 22 included several unusual provisions designed to prevent the legislature from making significant changes to the law.
The measure requires the legislature to reach a seven-eighths majority to make changes to the law, a supermajority that is considered unattainable. It also requires that any changes be “consistent” with Prop. 22, blocking the legislature from drastically altering or reversing the law.
If the independent status of drivers were changed, the rest of Prop. 22 would also be invalid. So if drivers were declared employees, Uber and Lyft could withdraw from the higher wages, private accident insurance, and other benefits offered under Prop. 22.
Because the issue of workers’ compensation could not be separated from the rest of Prop. 22, Judge Roesch wrote “that Proposition 22 in its entirety” could not be enforced.
Finally, the judge also opposed a clause in Prop. 22 that prevents self-employed workers from organizing. Prop. 22 says that any future law giving an organization the right to collectively bargain for drivers’ benefits, compensation or working conditions would be considered an amendment and would be subject to the seven-eighths majority rule. Judge Roesch found that provision unconstitutional because a collective bargaining law should be considered “unrelated legislation.”
Who stepped in to block Prop. 22?
Three transportation drivers and one passenger are involved in the lawsuit, along with the International Union of Service Employees.
“We are going to continue to focus on how the gig corporations are putting their profits before their workers,” Michael Robinson, a Lyft driver from Loma Linda, California, said at a news conference Monday.
Who is on the other side of the courtroom?
Although the lawsuit focuses on how app-based businesses treat their workers, the coalition of drivers and labor groups is suing the State of California and the Department of Industrial Relations, which administers workers’ compensation.
The California attorney general’s office is now defending Proposition 22, an awkward turn of events, as the attorney general sued Uber and Lyft before Proposition 22 was passed in an attempt to force companies to employ your drivers.
Gig economy companies can still step in. His coalition, Protect App-Based Drivers and Services, is a defendant in the lawsuit and has said it plans to file an appeal.
“This outrageous decision is an affront to the overwhelming majority of California voters who approved Proposition 22,” said Geoff Vetter, coalition spokesman. “We will file an immediate appeal and we are confident that the Court of Appeals will uphold Prop. 22.”
The California Attorney General or Services and Drivers based on the Protect app can file an appeal to overturn Judge Roesch’s decision. Even an expedited appeal could take several months.
For now, temp economics companies may be required to start paying workers’ compensation funds, but the companies argue that nothing will change until the appeal is resolved. They also said they had no immediate plans to change the way drivers were classified. All the provisions of Prop. 22 will remain in effect until the appeals process is complete, Vetter said.
Stacey Leyton, the drivers’ attorney, disagreed. “The Superior Court declared Prop. 22 invalid” and drivers should be considered employees immediately, he said.
The California struggle begins to be repeated in other states. In August, companies called for a similar voting boost in Massachusetts, where the treatment of the self-employed already faces close scrutiny.
The SEIU and other labor activists vowed to keep up their fight and plan to help the organizing and activist efforts of the drivers.
“We will continue to support their actions for their demand for basic rights granted to them under current law, reaffirmed Friday,” said Alma Hernandez, executive director of SEIU California.