A US court has ruled that giants of the “gig” economy, including Uber and Lyft, can continue to treat their workers in the state of California as independent contractors.
The California Circuit Court of Appeals found an employment measure known as Proposition 22 to be constitutional.
Union groups and some workers had opposed the measure, saying it deprived them of rights such as sick leave.
The companies say the proposal protects other benefits like flexibility.
The latest ruling overturns a 2021 decision by a lower California court that found Proposition 22 interferes with the legislature’s powers to set standards in the workplace.
The state of California and a group representing Uber, Lyft and other companies have appealed the decision.
Shares of Uber and Lyft were nearly 5% higher on the news in after-hours trading.
“Today’s ruling is a victory for app-based workers and the millions of Californians who voted for Prop 22,” said Tony West, Uber’s chief legal officer.
“We are pleased that the court has respected the will of the people and that Prop 22 remains in place to protect driver independence,” added Mr West.
Lyft said the proposal “protects the value of pro-independence drivers and gives them new, historic benefits.”
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In November 2020, California voters passed Proposition 22, which allowed freelance workers to be classified as independent contractors.
It was a win for Uber and Lyft, who ran a $205m (£168.7m) campaign to support the measure.
However, victory came with some concessions, and companies had to offer some benefits to workers, including health and accident insurance.
Some drivers had supported Proposition 22, but working groups opposed it, pointing to all the benefits of being a worker, including sick days, vacation and overtime pay.
Tens of millions of people work in the global gig economy providing services such as food delivery and transportation.
Gig workers are paid for individual tasks, such as delivering food or driving a car, instead of receiving a regular wage.
Most U.S. federal and state labor laws, such as For example, those requiring a minimum wage or overtime pay do not apply to gig workers.
Companies like Uber and Lyft have come under increasing scrutiny as the industry has grown in size.
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