In a significant win for California workers, the state’s top court upheld a voter-approved measure recognizing rideshare drivers as independent contractors. For 1.4 million Californians and 72.1 million Americans, this ruling sets an important benchmark for worker freedom nationwide, fueling the dynamic and entrepreneurial spirit of the gig economy.
Last Thursday, the California State Supreme Court dismissed a case attempting to gut Proposition 22, a ballot measure ensuring independent contractor status for ride-share and delivery drivers. Following the unanimous decision, several gig-economy platforms praised the ruling, noting countless Californians will benefit from their continued ability to pursue alternative streams of income.
In a statement, Uber celebrated the ruling for upholding “the will of the nearly 10 million Californians who voted to deliver historic benefits and protections to drivers, while protecting their independence.” Similarly, Lyft stated that it was “thrilled that the California Supreme Court unanimously upheld the Democratic will of the voters and did what’s right for California’s communities and economy.”
Passed by nearly 60% of voters in 2020, Proposition 22 allows ride-share and delivery drivers to retain their independent contractor status. Prior to the passage of Proposition 22, California Assembly Bill 5 (A.B. 5) offered significant setbacks for the state’s gig economy, including forced reclassification of many independent contractors as W-2 employees based upon a restrictive three-factor “ABC test.” A.B. 5 is unpopular, with 88% of freelancers opposing the legislation following its passage in 2020.
From a fiscal perspective, it is hard to argue with the hostility directed at A.B. 5. In a 2022 study commissioned by Americans for Tax Reform and the Tholos Foundation, researchers discovered that if a restrictive “ABC test” were applied on a nationwide basis, fifty-six percent of independent contractors who would be forced into W-2 employment status would pay higher taxes. Furthermore, ninety-six percent of these workers –around 7.5 million individuals– make less than $400,000 per year, directly violating the Biden-Harris administration’s pledge to not raise taxes on anyone earning less than that amount.
Despite these hollow promises, Vice President Harris, the presumptive presidential nominee for the Democrat ticket, has strongly supported A.B. 5. On July 25, Harris re-stated her vow to impose the “PRO Act”, which would saddle the entire country with the ABC test.
The California State Supreme Court’s decision to preserve Proposition 22 represents a massive win for the gig economy. Following a recent failed attempt to overturn A.B. 5, this pro-worker measure is the last bulwark protecting countless Californians from losing their right to set their own schedule and be their own boss.