Summary:

• Uber and Lyft have won the Proposition 22 case in a California appeals court, allowing them to classify their drivers as contractors and not employees.
• The ballot initiative passed in November 2020 with 59% approval, exempting the companies from some labour laws and allowing drivers to operate as independent contractors, while still receiving some benefits.
• The decision was received positively by both companies as their shares rose slightly after the news was announced.

Uber and Lyft have won the Proposition 22 case in a California appeals court, which will allowed them to classify their drivers as contractors and not employees.

Also know as Prop 22, this was a ballot initiative in November 2022 state election where 59% of residents gave ride hailing companies approval to skirt employee-mandated commitments. However, drivers were entitled to some other benefits like like health insurance stipends for driving 15 hours a week and more.

The main goal of the proposition was to exempt the companies from the Assembly Bill 5, which was passed in 2019 to target companies that mostly rely on gig workers and thus, were outside the reach of many labour laws.

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Initially, a judge had ruled that Proposition 22 was unconstitutional because it prevented the legislature from overseeing the ride hailing firms. However, it seems even the drivers want to continue operating as independent contractors too.

The drivers’ preference is understandable because they get $0.30 per mile compensation for expenses for while dropping passengers off or en route to pick them up. They also enjoy protection as it forced employers to develop s****l harassment policies, conduct criminal background checks, and mandate safety training for drivers.

Shares of both companies rose slightly at the end of trading on Monday after the news broke.

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