On Monday, a California appeals court overturned a decision by a lower court and said that ride-hailing apps such as Uber (UBER) and Lyft could continue to call their drivers independent contractors. In November 2020, voters in California approved Proposition 22 that allowed drivers of the ride-sharing apps to be called contractors. A group including some drivers tried to get the court to strike it down. They succeeded in the lower court but lost their case in the appeals court. Shares of both Uber and Lyft rose after the victory.
In 2021, a California judge Frank Roesch from Alameda County Superior Court ruled that Prop 22 was unconstitutional. The ruling was appealed by the state and a group that included representatives from the companies and others. The Monday decision in favor of the ride-sharing apps resulted in a 5 percent rise in values of Uber, Lyft and DoorDash (DASH) stocks after hours.
The 63-page opinion from California justices from the 1st District Court of Appeal also stated, “Proposition 22 does not intrude on the Legislature’s workers’ compensation authority or violate the single-subject rule.” Two judges Justice Tracie L. Brown and Justice Stuart R. Pollak supported Proposition 22 while the third appeals court judge Jon B. Streeter wrote a dissenting opinion.
Proposition 22 was the most expensive ballot issue in the history of the Golden State. Ride sharing companies reportedly spent almost $200 million to promote a “Yes” campaign, which finally received support at the ballot. The companies prompted their drivers to vote in support and the proposition passed through with 58 percent of votes in its favor.
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Proposition 22 exempted companies such as Uber, Lyft and others from following certain minimum conditions including the following:
minimum wage
overtime and
workers’ compensation laws.
It required companies to pay subsidies for compensation and healthcare that was based on “engaged driving time” and other benefits such as safety training and “sexual harassment training.”
It is expected that Monday’s ruling will be appealed to the California Supreme Court.
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