California Court Rules In Favor of Independent Contractor Status

A California appeals court ruled yesterday that companies could still classify workers as independent contractors under the state's Proposition 22.

In 2021, a California judge ruled the proposition unconstitutional and unenforcible, arguing that "it infringed on the legislature's power to set standards at the workplace," according to CNBC. However, California lawmakers and a group representing these rideshare companies like Uber and Lyft appealed the decision, and the court ruled in their favor.

The ballot was introduced as a way to ensure that Uber and Lyft drivers would be given the same benefits of regular employees like minimum wage, workers compensation, health care, etc. The ballot measure exempted companies like Uber from having to provide these things, instead giving drivers healthcare "subsidies" based on driving time, as well as other benefits.

Though the bill passed with 58.6% of voters in support, a group of drivers banded together to strike down the ballot measure, and won its initial court battle, though yesterday's decision ended their campaign.

"Proposition 22 does not intrude on the Legislature's workers' compensation authority or violate the single-subject rule," the opinion from the 1st District Court of Appeal says.

"Today's ruling is a victory for app-based workers and the millions of Californians who voted for Prop 22," Uber's chief legal officer Tony West said, according to CNBC. "Across the state, drivers and couriers have said they are happy with Prop 22, which affords them new benefits while preserving the unique flexibility of app-based work."

This legislation pertains mostly to workers in the gig economy, but is still feels related to the promotional products industry, as legislation regarding independent contractor status has caused concerns for distributors.

In 2021, Rep. Bobby Scott introduced legislation known as the PRO Act that would prevent American employers from "misclassifying" employees, thus preventing them from union benefits, and essentially eliminate independent contractor status.

Many promotional products distributors do business as independent contractors. In 2021, PPAI found that as many as 45% of the industry's sales force identify as independent contractors. That number is much higher when you look at smaller distributorships.

The PRO Act passed the house in March 2021, but has stalled since, due to a lack of traction in the Republican-controlled Senate at the time.

There hasn't been much movement with the PRO Act since then, but the result in California regarding gig economy workers indicates that legislators could feel sympathetic toward independent contractor status.