The Californian Court of Appeals has overturned a lower court’s decision that sought to classify drivers working for ridesharing firms like Uber Technologies Inc (NYSE: UBER) and Lyft Inc (NASDAQ: LYFT) as independent contractors. As reported by CNBC, the objection to Proposition 22 which was voted for by California residents was raised by a group of drivers who sued the firm.
Proposition 22 was approved by California voters back in November 2022. Per the provisions of the proposition, it allowed Uber and Lyft to treat drivers as contractors and not employees. This implies that there was a limit to the obligation of the firm in terms of remuneration to the drivers, a development that is designed to help cut the costs of operations significantly.
Proposition 22 was tagged as unconstitutional by a lower court in 2021 and the current verdict from the Court of Appeals has given the associated firms the required legal backing to define their own terms of engagement and remuneration for hundreds of thousands of drivers.
Despite the Provisions of Proposition 22, Uber is still obligated to grant the drivers some form of incentives including medical insurance, which in this case, will be dependent on time spent driving. One of the arguments that were a point for consideration was the fact that it infringes on the powers of the legislature to establish standards in the workplace.
“Proposition 22 does not intrude on the Legislature’s workers’ compensation authority or violate the single-subject rule,” the opinion highlighting the verdict from the Appeals court reads.
The verdict has helped bolster the recovery of both Uber and Lyft stocks in the pre-market today. While Uber stock is up 5.94% to $32.65, Lyft has jumped as high as 4.96% to $8.88.
Welcome Verdict for Uber and Lyft
With the global economy currently being strained as well as the push for funds diversification, the strain on companies on Wall Street has continued to grow over the past few years. The duo, as well as their counterparts in other business areas, would have had to start coughing out unrealistic budgets to support the obligations that will be attached to the claims if drivers were classified as regular staff and not contractors.
The firms are at peace with the verdict and according to an Uber spokesman, the verdict reflects the wishes of some of its drivers as well.
“Today’s ruling is a victory for app-based workers and the millions of Californians who voted for Prop 22. 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,” Uber chief legal officer Tony West said in a statement.
No mention of whether the case will still be dragged until further redress is unveiled if at all, the current verdict puts an end to the lawsuit.
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