California Court of Appeals Rules that Proposition 22 is Constitutional…Mostly…For Now

From JDSupra, Jared Slater discusses the recent California appealate court decision that reversed the trial court’s determination that Proposition 22, which said Uber and Lyft drivers were indepedent contractors, was unconstiutional. Jared writes:

In the 2020 general election, Californians passed Proposition 22, which gave ride-sharing and delivery app companies such as Uber, Lyft, and DoorDash the ability to continue classify their drivers as independent contractors.  Shortly after the proposition passed, a group of drivers challenged its constitutionality.  At its core, the issue is whether drivers in the gig economy should be entitled to the benefits typically afforded to employees.  As independent contractors, these workers forgo such benefits in exchange for the right to set their own work schedule and receive increased tax benefits.

In 2021, a trial court ruled in favor of the drivers and held that the proposition was unconstitutional because it: (1) intruded on the California Legislature’s exclusive authority to create worker’s compensation laws; (2) unduly limited the Legislature’s authority to enact legislation that would not constitute an amendment to the proposition; and (3) violated the single-subject rule for initiative statutes.  In short, by invalidating Proposition 22, the trial court determined that these drivers should be classified as employees.

Naturally, an appeal followed.  On March 13, 2023, the Court of Appeal disagreed with the trial court and determined that Proposition 22 was mostly constitutional.  In the 132-page opinion, the appellate court reversed most of the trial court’s ruling, thereby reinstating the ride-sharing and delivery app companies right to determine whether their drivers are employees or independent contractors.  The one section of the proposition that remains unconstitutional is Section 7465, subsections (c)(3) and (4), because these provisions unduly limited the powers afforded to the Legislature to enact amendments to the legislation; specifically the authority to authorize collective bargaining over driver’s compensation, benefits, or working conditions – an issue that was not expressly contemplated by the proposition when passed.

Given the vested interests and potential money at stake on both sides of the issue, it is highly likely that the drivers and labor unions (led by the Service Employees International Union (SEIU)) will seek a determination from the California Supreme Court to settle the issue.  While companies such as Uber, Lyft, and DoorDash have won the day, their next challenge, prevailing before a high court which has largely favored employees over employers, will be a much more difficult task.

Source: California Court of Appeals Rules that Proposition 22 is Constitutional…Mostly…For Now | Ervin Cohen & Jessup LLP – JDSupra

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