In July 2024, in the case of Castellanos v. State of California, the California Supreme Court issued a ruling which upheld a voter-approved law that allows app-based transportation companies such as Uber and Lyft to classify their drivers as independent contractors, and not as employees.
In 2020, Uber and Lyft spent approximately $200 million on Proposition 22 in an attempt to be exempt from California’s strict AB5 law. AB5 presumes workers are employees unless the hiring company can meet a strict criteria to classify the worker as an independent contractor. Read more about AB5 on our website here.
In its Castellanos ruling, the Court did not critique the pros and cons of AB5 or the gig economy. Instead, the Court ruled that a voter-approved proposition does not conflict with the rights of the California’s legislature to regulate and pass laws related to CA’s workers compensation system. Prop 22 made gig workers and drivers ineligible for workers compensation benefits and sick pay. Prop 22 does provide certain benefits to these workers, including a minimum earning of 120% of CA’s minimum wage, health care stipends, occupational accident insurance and accidental death insurance.
The irony of the Castellanos ruling is AB5 was targeted at gig-economy companies such as Uber and Lyft, but these companies were able to buy an exemption from AB5 through Prop 22. Meanwhile, AB5 remains enforceable against most industries in California, including the majority of the transportation and logistics industries. To learn how to make your business compliant with AB5, contact the employment law attorneys at Chauvel & Glatt. If you are a transportation or logistics company, contact our transportation attorney to address AB5 issues unique to the transportation industry.
This material in this article, provided by Chauvel & Glatt, is designed to provide informative and current information as of the date of the post. It should not be considered, nor is it intended to constitute legal advice. For information on your particular circumstances, please contact Chauvel & Glatt at 650-573-9500 for legal assistance near you.
