Prop 22 Update: California Court Upholds Classification of Gig Workers as Independent Contractors

Workers have historically fallen into two categories: employees and independent contractors. In November 2020, California voters passed Proposition 22: a ballot initiative to create a third type of worker classification. In February 2021, three California drivers and the Service Employees International Union filed a complaint against the State of California in the Alameda County Superior Court of California. In their complaint, the plaintiffs alleged that Proposition 22 was unconstitutional because it: 

1. Intrudes on the Legislature’s exclusive authority to create workers’ compensation laws, 
2. Restricts the courts’ authority to interpret the Constitution, 
3. Limits the Legislature’s authority to enact legislation that would not constitute an amendment to Proposition 22, and
4. Violates the single-subject rule for initiative statutes.

Listen to today's podcast for the implications of this case on gig workers.

Be sure to check out the video version of this interview on our YouTube page.

Visit our website for information about our legal services related to emerging technologies.

Transcript

ZBP     Zachary B. Pyers, Esq.

KHS    Kenton H. Steele, Esq.

ZBP

            Welcome to today’s episode of the Reminger Report Podcast on Emerging Technologies.  We are here today to discuss a recent case decision that came out.  Kenton is going to be talking with us about this case and it’s important both to the gig economy and kind of how it relates to workers within the gig economy.  So Kenton, if you would, tell us about this recent decision.

KHS

            Sure, so a frequent topic of conversation on this show and in the sort of gig economy space has been Proposition 22 which was a ballot initiative in California that was passed in November of 2020 that did a lot of sort of updating to the legal classification of rideshare drivers and gig economy workers as a whole.  Essentially the law allowed these workers to remain nominally as independent contractors but provided them some additional benefits that are typically reserved for employees, and this includes things like workers are entitled to the benefits of minimum wage laws, access to health insurance, things like that.  Obviously since that was passed in November of 2020, there’s been quite a lot of legal disputes concerning Proposition 22 and the statute that it put in place, and recently an appellate court decision came out from the First District of California that upheld portions of Proposition 22, so a prior decision back in February of 2021 from an Alameda County Superior Court in California had struck down Proposition 22 on the basis that it was unconstitutional under the California State Constitution for a variety of reasons.  The basis that the state court, the trial court, identified where that, the substance of Proposition 22 intruded on the state legislature’s exclusive authority to set laws for Workers’ Compensation issues, that the law restricted the court’s ability to interpret the Constitution of the State of California, essentially a separation of powers issue, and also that the Proposition limited the legislature’s authority to change the law itself.  You may recall that Proposition 22, one of the more interesting aspects of it, is that it contained within it different rules for what would be necessary to amend, essentially a majority, simple majority vote of the legislature would not be enough to amend Prop 22.  It would need sort of a supermajority in order to pass a change, and then the final, very final point, and you see this a lot with ballot initiatives is it was claimed that the initiative itself violated a single subject rule that applies to initiatives, meaning the law can only really cover one subject at a time.  As I said, that was the trial court’s finding back in February of 2021 which struck down Prop 22.  That decision has now been reversed by the First District Court of Appeals in California.

ZBP

            I think you already talked, I mean, kind of a lot about this even when you were kind of unpacking the decision for us, but tell us, why is this important.

KHS

            The, the real import of this obviously is the continuing validity of Proposition 22, that this sets up a framework the court, in a very lengthy decision, over 130 pages, went through the analysis of whether or not Proposition 22 was constitutional, again, under the California State Constitution.  This sets up a framework for this law continuing to be applicable.  Obviously this is not the last challenge that we’ll see or even the last that we’ll hear of this case, but in its decision, the court really went through how the trial court sort of was off base in finding the law to be unconstitutional.  The biggest component is that while the appellate court did find some aspects of Proposition 22 to be problematic, the court found that those aspects, the separation of powers issue that we talked about, were severable from the rest of the statute, meaning the offending parts could simply be disregarded and the rest of the law, the substance of the law, could continue to be in place, and that was different than what the trial court found.  The trial court found that it was not severable, meaning the whole law would have to be struck down, so by carving out those few unconstitutional parts regarding the separation of powers issue, that sets up the continuing enforceability and validity of Proposition 22.

ZBP

            So, you know, the question with a lot of these cases is - What’s next?

KHS

            Well, we’ve kind of got two, two different ways to answer that question.  As far as what’s next for this case, obviously this is set up to go to the California Supreme Court for sort of the final word on how this is going to apply in that state, whether or not Proposition 22 will continue to be the law in the State of California.  We’re likely looking at another year or more before we get that decision from the Supreme Court of California, but on the other hand, we also, you know, the Court of Appeals decision can be used, as I said, as a framework for how this law can work and other, as other jurisdictions in other states start to look at implementing a similar structure, a similar legal framework to Proposition 22, it’s likely that we’ll see those decisions regarding what type of law will be proposed being informed by the content of this recent decision from the appellate court in California, so on the one hand we’ve got a continuing appeal in this case; on the other hand, we’re likely to see more laws like this pop up in other jurisdictions based on the content of this appellate court ruling.

ZBP

            Great.  Thank you for giving us this update, and we appreciate your time.

KHS

            Thank you.