Gig economy in focus: California rules in favour of Uber, Lyft classifying drivers as contractors

California's court upheld a measure allowing Uber and Lyft to consider drivers in the most populous US state as independent contractors rather than employees entitled to more benefits.


The ruling comes a welcome relief for the ride-hailing companies, who had vowed to end or limit services in case the verdict was the other way round. The Service Employees International Union (SEIU) and four drivers who legally moved against a 2020 ballot measure known as proposition 22, which preserve4s drivers' contractor status.

Uber in a statement said, 'the will of the nearly 10 million Californians who voted to deliver historic benefits and protections to drivers, while protecting their independence.'

Meanwhile, the union expressed disappointment by the ruling, stating that they will continue to fight for their rights. 'Gig workers are determined to ensure fairness in the gig economy,' Tia Orr, executive director at SEIU California said.

The issue of treating gig workers as employees or contractors has been an issue across ride-hailing companies. Studies show that treating drivers as contractors saves up to 30 per cent for the companies, who have to otherwise spend on minimum wage, overtime pay and reimbursements for expenses. Uber and Lyft are among companies that spent more than $200 million on a campaign to promote flexibility.