Uber and Lyft can continue to treat their drivers as contractors in California, a state appeals court ruled Monday, in a major victory for the ride-share companies.

The ruling by the 1st District Court of Appeal in San Francisco largely overturned a lower court’s 2021 ruling that Proposition 22 — passed by California voters the previous year — was unconstitutional and “unenforceable.”

Prop 22 exempts delivery-app and ride-share companies such as Uber and Lyft — pioneers of the digital gig economy — from classifying their drivers as employees, meaning the companies do not have to provide benefits such as health insurance. (They are required to provide a stipend toward health insurance coverage for drivers who work a minimum number of hours per week.)

The Service Employees International Union, which had filed suit seeking for Prop 22 to be invalidated, said it is considering appealing the ruling to California’s supreme court.

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Uber, Lyft and other gig-economy apps poured $200 million into the campaign to pass Prop 22. The measure passed with around 59 percent of the vote, but some voters said they misunderstood the question on their ballots and instead meant to give drivers more benefits, not fewer.

The appellate court said that the majority of Prop 22 was constitutional, including the stipulation that drivers be hired as contractors instead of employees.

But it struck down a section of the measure that had restricted drivers’ abilities to unionize by requiring...

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