The gig economy, including Uber and Lyft, believes they have discovered a strategy to triumph in the national labor conflict.

• Proposition 22 was upheld by California's top state court, allowing Uber, Lyft, Grubhub, and DoorDash to classify drivers as independent contractors rather than employees.
• The gig economy and drivers who prefer contractor status believe they have gained momentum nationwide to win the ongoing battle over their labor model, but unions are expected to push back for more benefits.
• The latest stage of the worker battle is happening during an election year, with new state ballot measures planned for November, and Tony West, the brother-in-law of Democratic Party presidential nominee Kamala Harris, stepping down from his position as Uber general counsel to advise her campaign.

In July, the top court of California upheld Proposition 22, which allows app-based services such as Uber, Lyft, Grubhub, and DoorDash to classify drivers in the most populous U.S. state as independent contractors rather than employees.

The California Supreme Court ruling was a significant triumph for the ride-hailing sector, which has a financial stake in categorizing gig workers as independent contractors. Although limited to California, legal experts anticipate the trend to spread to other states where the matter has not yet been addressed.

"Prop 22 supporters, including gig-based workers and some companies, plan to expand the measure to other states, while opponents, including unions, will push for more protections for workers through state legislatures."

While independent contractors are not typically entitled to as many benefits as employees, Proposition 22 granted rideshare and delivery drivers certain wage and insurance-related benefits while preserving their independent status.

"Uber posted on its website after the California top court's decision that Prop 22 is a testament to what can be done when we listen to drivers and couriers. Policymakers worldwide are shifting away from outdated discussions based on a binary choice between employment with benefits or independence with none. Instead, they are actively engaging with drivers and couriers to develop innovative models that preserve their independence while requiring important new benefits and protections. Uber stands ready to ensure that progress continues."

The rideshare labor battle has a significant impact on a substantial portion of the U.S. population, with one in five urban Americans utilizing ride-hailing services, including 15% of those residing in suburban areas, as per Pew Research.

After the recent verdict, Lyft expressed its excitement with the decision. According to a survey conducted in California, more than 80% of drivers stated that Prop 22 has been beneficial for them. In fact, the median hourly earnings of drivers on the Lyft platform in California increased by 22% in 2023 compared to 2019. The Chief Policy Officer of Lyft stated in the Washington Post that Prop 22 has created a framework for discussions with leaders in other states and Washington. He added that the company believes that Prop 22 has created a model that can be replicated and scaled.

The California decision serves as a model for other states to closely examine the practices of ridesharing companies regarding worker benefits, and there has been much legal debate over their classification as independent contractors under state law, according to James Yukevich, founding partner of Yukevich Cavanaugh.

The ongoing labor battle between powerful technology companies and major labor unions is intensifying after a recent decision in California. This is happening during an election year, with state ballot measures set for November. Additionally, Tony West, the brother-in-law of Democratic Party presidential nominee Kamala Harris, has taken a leave of absence from his role as Uber's chief legal officer to advise her campaign.

New York, Massachusetts, Pennsylvania, Minnesota actions

Recently, high-population states have seen a surge of actions and compromises between rideshare companies and state governments regarding the classification of rideshare drivers as independent contractors.

In November, New York reached two settlements worth $328 million with Uber and Lyft to address multi-year investigations into driver conditions. The settlements include payments to drivers for back pay, as well as the implementation of a minimum driver "earnings floor," paid sick leave, and other improvements in working conditions. Uber paid $290 million, while Lyft paid $38 million, both of which were to be distributed to current and former drivers.

In late June, Massachusetts reached a settlement with Uber and Lyft that mandates a minimum wage of $32.50 per hour for drivers and provides them with a range of benefits and protections. Additionally, Uber and Lyft will pay a combined total of $175 million to the state, with much of the funds being distributed to current and former drivers. The state had been pursuing a court ruling that would classify Uber and Lyft drivers as employees rather than independent contractors.

The attorney general's office in Massachusetts announced that it had reached a settlement with Uber and Lyft, ending their multi-year litigation against the state. The settlement ensures that the companies will not attempt to change state employment law through a 2024 ballot initiative, which would have included an earnings standard that did not guarantee a minimum wage.

In Pennsylvania, a federal district court judge dismissed a case against Uber in late July, ruling that workers should not be classified as employees or contractors under the Fair Labor Standards Act and certain state statutes. The case had two hung juries, and the court's decision was based on the idea that the issue was too complex to be resolved again.

In his opinion, senior judge Michael M. Baylson stated that the "either-or" determination does not align with the nature of the gig economy, particularly in the case of Uber Black.

Gig workers might see more efforts to unionize

Union leaders have stated their desire for gig drivers to receive more benefits than are currently offered. They may attempt to push for unionization through ballot initiatives or by supporting legislation in liberal states, where unions have traditionally had more success.

Unions are similarly galvanized as companies at present, according to Donelan.

In November, Massachusetts voters will have the opportunity to vote on a ballot initiative that would enable rideshare drivers to unionize and negotiate collectively with companies like Uber and Lyft, even after the state's settlement.

Unions are interested in these individuals becoming employees or being allowed to unionize, as transportation is typically a highly unionized sector, according to John Wicker, partner at Stradling Yocca Carlson & Rauth.

The issue of ride-share drivers and gig workers becoming eligible for workers' compensation in California is not settled, as the court left it open. According to Gregory P. Feit, senior associate at Reavis Page Jump, the issue is not necessarily resolved even in California.