On August 20, 2021, a California judge ruled that California’s Proposition 22 was unconstitutional. That means, at least for now, rideshare apps like Uber and Lyft will not be able to use Proposition 22 to shield themselves from liability for classifying their drivers as independent contractors rather than employees.
If you have not heard, this is not a new dispute. The origins of the dispute about independent contractor versus employee status for these workers trace back to a 2018 California Supreme Court decision, which established the “ABC” test that is now utilized in many jurisdictions to distinguish employees from independent contractors. The ruling was later codified and expanded by the California Legislature. Under California’s ABC test, independent contractors working as drivers for “app-based” platforms were reclassified as employees.
Proposition 22 followed in November 2020, when it was passed after receiving approval from 58% of the voters in California as an initiative statute. The Proposition received millions of dollars of backing from rideshare and food delivery companies and provided an independent contractor exception for “app-based” drivers. Proposition 22 purports to allow app-based drivers to be classified as independent contractors, rather than employees. As independent contractors, drivers are not entitled to certain protections such as minimum wage, overtime pay, tax benefits, and more.
In Hector Castellanos, et al. v. California, a group of drivers from mega ride share companies such as Uber and Lyft, along with the Service Employees International Union, challenged Proposition 22. Originally, the plaintiffs attempted to take their case directly to the California Supreme Court in January 2021, however, the Court declined to hear the case and directed the Plaintiffs to file it in the appropriate lower court.
Heeding the Court’s direction, the Plaintiffs did just that and Alameda Superior Court Judge ruled on the lawsuit challenging the constitutionality of Proposition 22. The court said the initiative is unconstitutional because:
(1) It limits the California Legislature’s ability to enact future legislation concerning the app-based drivers’ workers’ compensation in violation of the California Constitution. The court found that employees are covered by worker’s compensation, while independent contractors are not, and Constitutional amendment—not “initiative statue”— is the appropriate method to restrict the Legislature’s power.
(2) It violates the single subject rule because it deals with both the drivers’ worker classification and the California Legislature’s ability to legislate concerning the workers’ collective bargaining rights.
The Proposition 22 backers indicated they would appeal the decision; the measure will remain in effect pending the outcome of that appeal. And while that final review will be heard by the appellate courts, we will likely have to wait for a final ruling by the California Supreme Court to learn the fate of app-based drivers.
Additionally, it’s important to remember that Proposition 22 only applied to app-based drivers and not all freelance workers. The state of California uses a bill called AB-5 to determine whether a person is justly freelancing or being taken advantage of. Ultimately, the proposition was deemed unconstitutional (for now), but most other California gig workers (except those in later-exempt industries) still have to pass the ABC test that AB-5 requires in order to properly be classified as an independent contractor.