Uber, Lyft Score Victory as California Court Affirms Right to Treat Drivers as Contractors

Uber and others are in a global tug of war with regulators over whether and how to grant more benefits such as paid sick leave and health insurance to workers in the so-called gig economy, where apps distribute individual tasks to a pool of people whom companies generally regard as independent contractors.

California sued Uber and Lyft in 2020, saying they were in violation of a new state law that sought to reclassify their drivers as employees. A legal battle ensued, culminating in Proposition 22, in which Uber, Lyft,

DoorDash Inc.

and Instacart Inc. asked state voters to exempt them from the law. The companies spent a record amount of money for a California ballot measure, about $200 million.

The companies promised workers flexibility alongside some benefits if the ballot measure passed.

In television, print and radio ads at the time, the companies told voters that a reclassification would kill the flexibility that workers enjoy and significantly raise ride-share and delivery prices for consumers.

A group of ride-share drivers and labor unions challenged the constitutionality of Proposition 22. In August 2021, a California judge ruled that it was unconstitutional because it limited the state legislature’s authority and its ability to pass future legislation. The companies appealed that decision, which led to the latest ruling in the California First District Court of Appeal.

Write to Preetika Rana at preetika.rana@wsj.com