In 2018, the California Supreme Court determined that the ABC test must determine independent contractor status. The criteria include the worker being free from control while performing services, performing a service outside the scope of the company’s business, and working in an independent business, occupation, or trade.
California Assembly Bill, or AB5, was passed into law in 2020. The bill was introduced to make legal distinctions between independent contractors and employees. The bill affected independent contractors who provide rideshare and delivery services and required them to be reclassified as employees. When the bill was signed into law, it drew attention nationwide.
The California legislature passed Proposition 22 with voter approval that designated rideshare and delivery drivers for Lyft and Uber as independent contractors and not entitled to employee benefits, including unemployment insurance, paid sick leave, and overtime pay. Opponents of the law claimed it limited legislative powers to pass or change laws about worker’s compensation. The law benefits drivers who wish to work a few hours a week. However, labor union representatives say the law prohibits drivers from gaining more rights.
The California legislature mandated companies like Uber and Lyft reimburse drivers for their expenses, pay for health insurance, and provide overtime pay and minimum wages. The law would change California’s rules about independent contractors and employees and increase business expenses. In 2020, voters approved a ballot proposition that exempted companies that provided app-based delivery and ride services from the law. However, the law included alternative benefits, including health insurance subsidies and a guaranteed minimum wage for drivers who worked at least 25 hours a week.
A representative of Uber stated that whether drivers choose to work a few hours or more, their freedom to work is now California law, and they don’t have to be forced into an employment plan they don’t want. While some drivers for the two companies would prefer to unionize for higher wages and employee benefits, many others prefer the flexibility of working when they want to.
On July 25th, 2024, the California Supreme Court unanimously upheld its ruling categorizing Doordash, Lyft, and Uber drivers as independent contractors rather than company employees. The court ruling stated that the companies providing these services didn’t have to claim their drivers as full-time workers and that the California Constitution doesn’t prohibit voters from passing legislation that impacts workers’ compensation plans. The ruling upholds Proposition 22 and allows companies to classify drivers as independent workers, not employees.
Since the decision in California stating that companies that provide rideshare and delivery services may classify their drivers as independent contractors, more states are considering revising their legislation.
Martin Gasparian is the founder of Maison Law, a California Personal Injury Law Firm. Martin is a graduate of Georgetown University Law School and has been practicing law in California 2004. His practice focuses on helping injury victims know their rights and recover just compensation.
