Rideshare Drivers: Employees or Contractors?

On May 21, the California Supreme Court heard arguments that may determine the future of ridesharing in the state. Specifically, the Court is considering how rideshare drivers operating under Uber and Lyft should be compensated following the 2020 ballot measure known as Proposition 22.

The case is championed by the Service Employees International Union (SEIU) alongside four rideshare drivers who are challenging the constitutionality of Prop 22. The proposition was supported by nearly 60% of the state’s voters and effectively exempted app-based drivers from a state law that restricted the type of workers who could be classified as contractors rather than traditional employees. This is a critical distinction for workers and companies alike, as the classification determines whether a worker is entitled to overtime, benefits, minimum wage, and other protections that are not guaranteed to contractors. These considerations have dramatic effects on both the drivers’ ability to make a living and the companies’ bottom lines.

Prop 22 was heavily supported by app-based ridesharing companies who stated that without the measure, the increased compensation to drivers could make them reconsider whether they will continue operating within California. The terms of the passed proposition allow rideshare drivers to be classified as contractors, however only if the company meets certain compensation requirements. For example, the drivers must be paid at least 120% of the state’s minimum wage amount while passengers are in the car, and the drivers must also receive expense reimbursements and subsidies to pay for health insurance.

During oral arguments, the justices reminded the SEIU attorneys that the electorate and the legislature are required to share lawmaking powers under the state’s constitution. The justices further stated that if the legislature disagrees with the passing of Prop 22, lawmakers could choose to extend traditional employee benefits and protections to rideshare drivers anyway. However, lawyers from the SEIU pointed out that a provision within Prop 22 barring amendments would make this workaround difficult for lawmakers to accomplish.

California is not the only state dealing with the issue of how to classify rideshare drivers. The Minnesota legislature recently lowered the minimum wage amount that companies have to pay drivers. This decision followed threats from Uber and Lyft to stop providing services in Minneapolis after the city passed higher minimum wage requirements. Meanwhile, the Massachusetts Attorney General has initiated a lawsuit against Uber and Lyft alleging that the companies classified drivers as contractors to avoid having to abide by the state’s minimum wage and overtime laws.

Rulings from the California Supreme Court are usually issued within 90 days of oral arguments. So for now, sit back, buckle up, and consider tipping your driver!

Emiley Hatten, Law Clerk, BridgehouseLaw LLP, Charlotte

image: Freepik