The California Supreme Court ruled on Thursday to uphold Proposition 22, which allows rideshare drivers like those from Uber and Lyft to remain contract employees rather than as employees with benefits.
The rule gave some limited benefits to contract employees but allowed them to remain employed on a contract basis.
A lower court had ruled the law unconstitutional, which would have required major changes to the way rideshare and other companies that use gig workers operate.
The ruling was expected after the justices seemed to side with proponents of Prop 22 during a ruling in May.
The two sides have been fighting over the rule for years, but it has remained in effect during the fight.
Companies including Uber, Lyft, DoorDash, and other gig-based companies had threatened to shut down their operations in California if Prop 22 was overturned.
That will not be necessary now.
Gig work is attractive for many who need a flexible schedule and those who need or want to work part-time. It can work well for students, parents caring for young children, and disabled workers who have times when their health does not allow them to work.
"Today marks an historic moment and a landmark victory," general counsel for Instacart Morgan Fong said in a statement Thursday. "Instacart shoppers consistently and overwhelmingly tell us they value their flexibility and independence. The Court’s decision preserves access to the flexible earnings opportunities they want and the important benefits provided under Prop. 22."
More than 1 million people drive for app-based companies in California and would have been impacted by striking down the rule.
The companies spent $200 million campaigning for Prop 22 before it's passing.
Uber spokesperson Zahid Arab said the decision "affirm[ed] the will of the nearly 10 million Californians who voted to deliver historic benefits and protections to drivers, while protecting their independence."
Arab referred to the original vote on Prop 22, which was on the ballot in 2020.
Opponents of the rule tried to argue that the state constitution gave the legislature the exclusive right to determine rules for worker's compensation in the state, but the judge rejected that argument.
