US court rules Uber and Lyft employees are contractors

A US court has ruled that economic giants, including Uber and Lyft, may continue to treat their employees as independent contractors in the state of California.

Unions and some workers opposed the measure, saying it deprived them of rights such as sick leave.

The companies say the proposal protects other benefits, such as flexibility.

The latest ruling overturns a 2021 California lower court decision that found Proposition 22 compromises lawmakers’ powers to set workplace standards.

The state of California and a group representing Uber, Lyft and other companies appealed the decision.

On Monday, a three-judge panel at the appeals court ruled that workers could be treated as independent contractors. However, it removed a clause imposing restrictions on collective bargaining by employees from Proposition 22.

Shares in Uber and Lyft were nearly 5% higher in after-hours trading.

“Today’s ruling is a victory for app-based workers and millions of Californians who voted for Prop 22,” said Tony West, chief legal officer at Uber.

“We are pleased that the court respects the will of the people and that Prop 22 remains in place, preserving the independence of the drivers,” added West.

Lyft said the proposal “protects the value of independence drivers and gives them new, historic benefits.”

The Service Employees International Union, which has challenged the constitutionality of Proposition 22 on various grounds, said it was considering appealing the court’s decision.

In November 2020, California voters passed Proposition 22 allowing freelancers to be classified as independent contractors.

It was a win for Uber and Lyft, who ran a $205 million (£168.7 million) campaign to support the measure.

Some drivers supported proposal 22, but other drivers and unions opposed it, citing all the benefits of being classified as an employee, including sick days, leave and overtime.

Tens of millions of people work in the global gig economy in services such as food delivery and transportation.

Gig workers are paid for individual tasks, such as delivering food or a car ride, rather than being paid a regular wage.

Most US federal and state employment laws, such as those requiring a minimum wage or overtime, do not apply to gig workers.

Companies like Uber and Lyft are coming under increasing scrutiny as the industry expands.