Uber and Lyft can continue to treat their California-based drivers as independent contractors after a US court ruling.

The California court of appeals determined that Proposition 22, a labor measure, was essentially constitutional.

Labor organizations and some employees opposed the measure, arguing that it violated their rights to sick leave.

According to the companies, the proposal safeguards other benefits, such as flexibility.

The most recent ruling reverses a decision made by a lower court in California in 2021, which held that Proposition 22 affected legislators’ ability to set workplace standards.

The decision was appealed by the state of California and a group representing Uber, Lyft, and other companies.

Monday, a three-judge panel of the court of appeals determined that employees could be considered independent contractors. However, it removed a provision from Proposition 22 that placed restrictions on employees’ collective bargaining.

In after-hours trading, shares of Uber and Lyft rose by nearly 5 percent.

“Today’s ruling is a victory for app-based workers and the millions of Californians who supported Proposition 22,” Uber’s chief legal officer, Tony West, stated.

Mr. West added, “We’re pleased that the court respected the will of the people and that Prop 22 will remain in effect, preserving driver autonomy.”

The proposition, according to Lyft, “protects the independence that drivers value and provides them with new, historic benefits.”

The Service Employees International Union, which along with several drivers challenged the constitutionality of Proposition 22, stated that it was contemplating an appeal of the court’s decision.

Voters in California approved Proposition 22 in November 2020, allowing freelancers to be classified as independent contractors.

Uber and Lyft, who spent $205 million (£168.7 million) on the bill, won.

However, the victory came with concessions, and employers were required to provide employees with healthcare and accident insurance.

Some drivers supported Proposition 22, while other drivers and labor organizations opposed it, citing the numerous advantages of being classified as employees, such as paid sick leave and overtime pay.

In the global gig economy, tens of millions of individuals provide services such as food delivery and transportation.

Individual tasks, such as food delivery or a vehicle ride, pay gig workers, as opposed to a regular wage.

Most federal and state labor regulations in the United States do not apply to gig workers. Such as those requiring a minimum wage or overtime pay.

As the industry expands, firms like Uber and Lyft have come under increased scrutiny.