The gig isn’t up: Top California court upholds Prop. 22

Gig companies like Uber, Lyft and DoorDash can keep classifying their drivers and delivery workers as independent contractors instead of employees in California, after the state’s Supreme Court voted to uphold a law known as Proposition 22 on Thursday. 

California voters passed this measure in 2020 following a $200 million campaign led by the gig companies. Prop. 22 gives app-based workers some benefits and earnings guarantees, but not the full protections granted to employees. 

Opponents of Prop. 22 said that the law is unconstitutional because it affects lawmakers’ authority to rule over worker compensation, which the California Supreme Court disagreed with today. Some drivers and unions also argued that the law denied them of proper protections and shifted the cost of doing business on workers. The median hourly net pay for app-based drivers in California — a group of about 1.4 million — is $5.97 before tips, according to a UC Berkeley study.

This ruling removes a major obstacle in the eye of investors. If Prop. 22 was overturned, the gig companies would have to upend their business model and pay millions of dollars to workers, and the cost could eventually shift to users.

Shares of these firms initially spiked as much as 6% on the news, but those gains faded in the afternoon along with those of the broader market.