The Supreme Court has ruled that Uber and Lyft drivers are independent contractors rather than employees. This ruling comes from the California Supreme Court, which determined that drivers for these ride-sharing services should be classified as independent contractors instead of employees. This means that drivers who seek more benefits as employees are not being supported, and the ruling favors the ride-sharing companies. 

This decision is not only significant for ride-sharing services but is also expected to have a considerable impact on various other sectors, such as delivery services and retail, particularly affecting what are known as gig workers—those engaged in short-term, flexible jobs. The article suggests that this ruling will serve as a major precedent and will likely influence many workers in similar situations. 

The background of this issue is somewhat complex. It revolves around the long-standing debate over whether certain workers should be classified as employees or independent contractors. From the perspective of workers, there is a general tendency to prefer being classified as employees.

From the employer's perspective, they tend to view workers as independent contractors. This is because, from the employee's standpoint, the first aspect to consider is benefits and protections. If classified as a regular employee, they are legally entitled to minimum wage, overtime pay, sick leave, unemployment insurance, and health insurance benefits. Additionally, even if they are terminated, they are likely to receive severance pay and other legal protections. In contrast, independent contractors do not have the right to these benefits. They are responsible for paying their own taxes as self-employed individuals. While there are advantages, such as flexibility in work style and hours, there is also the issue of income stability. Being a regular employee provides a fixed salary and benefits, which ensures relatively stable income.

There will be differences in income based on contracts that are variable and not fixed for independent contractors. On the other hand, from the employer's perspective, it works the opposite way. For full-time employees, cost management is actually more stable, but it can be a significant burden for employers. In addition to salaries, there are costs for benefits, health insurance, pensions, and paid leave. In contrast, when hiring independent contractors, there is no obligation for such benefits, which can lead to reduced labor costs. There is also greater flexibility in hiring and firing. In any case, there are differences in these aspects. Independent contractors work only under specific contract conditions, so while the company's control is relatively limited, on the other hand, adjusting the workforce as needed is much more flexible.

There are advantages, particularly in terms of legal responsibility. From the employer's perspective, there are various legal regulations when it comes to terminating or changing the employment conditions of full-time employees. In contrast, independent contractors have significantly fewer legal responsibilities. For this reason, employers tend to prefer independent contractors, while workers generally prefer employees. 

In this context, there was a law that came out in California in 2019, known as the AB5 law. This law introduced the ABC test to clearly distinguish between independent contractors and full-time employees. To be classified as an independent contractor, one must meet all three criteria of the ABC test; if any one of them is not met, the individual is considered a full-time employee. This law can be seen as quite employee-friendly.

The worker must be free from the company's control and directives. This means that the worker should have a significant degree of independent decision-making regarding how they work and their schedule. Additionally, the tasks performed by the worker must be different from or independent of the company's main business. For example, if a software development company contracts cleaning services, this would satisfy the second element. The third element requires that the worker independently operates a separate business performing the same tasks; only then can it be said that they are not dependent on a specific company. This condition falls under the third element. Therefore, all three elements—A, B, and C—must be met for someone to be considered an independent contractor; if they are not met, the individual is regarded as a regular employee. This has been mentioned earlier in relation to the worker's side.

The law is designed to be closer to the reality that workers generally prefer to become full-time employees. According to this law, most ride-sharing service drivers are more likely to be classified as full-time employees. The intention was to ensure that these drivers could receive benefits such as minimum wage, health insurance, and paid sick leave. However, there was a law that came out in response to this, known as Proposition 22. The content of this proposition was contrary to the previous law. In simple terms, it allowed ride-sharing and delivery service drivers to maintain their status as independent contractors while guaranteeing a minimum income, providing subsidies for health insurance, and offering protections in their working environment. This effectively circumvented the existing regulations of AB5, giving employers more flexibility in their hiring practices.

The proposition aimed at allowing the structure can be seen by the residents. Therefore, app-based service providers like Uber and Lyft naturally lobbied heavily to pass Proposition 22. According to reports, they invested as much as $250 million into this effort. As a result, in November 2020, 58% of California voters approved the law. In this context, just last week, the California Supreme Court issued a ruling on a lawsuit filed by the Service Employees International Union and several drivers, claiming that Proposition 22 was unconstitutional. Ultimately, the court dismissed the case. This ruling supports the argument made by ride-sharing service providers that there are thousands of drivers involved.

This is being evaluated as a victory for companies that have claimed that treating all employees as such would force them to suspend or propose services in California. Many experts found it somewhat surprising that California, known for having the strongest pro-union sentiment in the country, has sided with these companies. The United Service Workers Union's California chapter expressed great disappointment but stated that they would continue to fight for union rights. On the other hand, the company issued a statement saying that this ruling provides drivers with record benefits and protections while also maintaining their independence, which was supported by 58% of California residents, representing the will of ten million people.

It has been stated that, from the perspective of companies, recognizing independent contractors can reduce labor costs by 30%. Therefore, if companies in the gig economy receive a ruling that recognizes them as employees, they will inevitably have to significantly increase service provision costs. This is why it was argued that the prices for services like Uber and Lyft would rise dramatically. This ruling is not just a matter of gig workers' status in California; similar debates are occurring in various states, and it is anticipated that this will have repercussions in other states as well. Of course, it remains uncertain whether other states will adopt California's ruling as it is. Nevertheless, such a ruling could trigger discussions about enacting similar laws or amending existing laws in other states.

This is an analysis of the article. Of course, it can also trigger discussions at the federal government level. The federal government can consider these state-level rulings to review federal employment regulations or introduce new policies. Therefore, efforts to create consistent regulations across the United States can also be made at the federal level. In fact, in 2022, the federal Department of Labor announced a worker classification rule that recognizes gig workers as formal employees, which has been in effect since March. Additionally, in March, Congress introduced a bill aimed at overturning the federal government's new worker classification rule, with bipartisan support. So, today's content is about the recent ruling from the California Supreme Court.

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