Cal Supreme Court Rules Uber-Lyft Proposition 22 Not Unconstitutional – Employment Law Weekly

Cal Supreme Court Rules Uber-Lyft Proposition 22 Not Unconstitutional

The California Supreme Court ruled last week that app-based ride-hailing and delivery services like Uber and Lyft can continue treating their drivers as independent contractors rather than employees. The unanimous decision by the state’s top court is a big win for tech giants.

In 2019, the Legislature enacted Assembly Bill No. 5 to address what it claimed was the misclassification of workers as independent contractors. Assembly Bill 5 took effect in January 2020. In October 2020, the Court of Appeal in People v. Uber Technologies, Inc. (2020) 56 Cal.App.5th 266, 273, prohibited Uber and Lyft from misclassifying their drivers as independent contractors under Assembly Bill 5.

In November 2020, Protect App-Based Drivers and Services supported Davis White and Keith Yandell in placing Proposition 22 on the general election ballot. Proposition 22 states that its purposes are to “protect the basic legal right of Californians to choose to work as independent contractors with rideshare and delivery network companies,” “protect the individual right of every app-based rideshare and delivery driver to have the flexibility to set their own hours for when, where, and how they work,” and “require rideshare and delivery network companies to offer new protections and benefits for app-based rideshare and delivery drivers, including minimum compensation levels, insurance to cover on-the-job injuries, automobile accident insurance, health care subsidies for qualifying drivers, protection against harassment and discrimination, and mandatory contractual rights and appeal processes.”

Proposition 22 passed with the support of 58.6 percent of the voters and enacted sections 7448 to 7467 of the Business and Professions Code.

Shortly afterwards, Hector Castellanos, Joseph Delgado, Saori Okawa, Michael Robinson, Service Employees International Union California State Council, and Service Employees International Union filed a petition for writ of mandate seeking a declaration that Proposition 22 is invalid because it violates the California Constitution.

The trial court granted the petition, ruling that the proposition (1) is invalid in its entirety because it intrudes on the Legislature’s exclusive authority to create workers’ compensation laws; (2) is invalid to the extent that it limits the Legislature’s authority to enact legislation that would not constitute an amendment to Proposition 22, and (3) is invalid in its entirety because it violates the single-subject rule for initiative statutes.

Proposition 22’s proponents and the state appealed, arguing the trial court was mistaken on all three points.

The Court of Appeal in a divided opinion agreed that Proposition 22 does not intrude on the Legislature’s workers’ compensation authority or violate the single-subject rule. But it concluded that the initiative’s definition of what constitutes an amendment violates separation of powers principles. Because the unconstitutional provisions can be severed from the rest of the initiative, it affirmed the judgment insofar as it declares those provisions invalid and to the extent the trial court retained jurisdiction to consider an award of attorney’s fees, and otherwise reversed in the published case of Castellanos v. State of California – A163655 (March 2023).

The California Supreme Court agreed to review the case limited to the issue to be argued and briefed as follows: “Does Business and Professions Code section 7451, which was enacted by Proposition 22 (the ‘Protect App-Based Drivers and Services Act’), conflict with article XIV, section 4 of the California Constitution and therefore require that Proposition 22, by its own terms, be deemed invalid in its entirety?”

The California Supreme Court affirmed the judgment of the Court of Appeal insofar as it held that Business and Professions Code section 7451 does not conflict with article XIV, section 4 of the California Constitution in the case of Castellanos et al. v. State of California et al. – S279622 (July 2024).

Under section 7465, the Legislature may amend provisions of Proposition 22 other than section 7451 as long as such an amendment “is consistent with, and furthers the purpose of, this chapter” and obtains a seven-eighths majority vote in each house of the Legislature. Plaintiffs and the Attorney General contend that section 7465’s supermajority requirement may conflict with article XIV, section 4 of the California Constitution

“We reserve these issues until we are presented with an actual challenge to an act of the Legislature providing workers’ compensation to app-based drivers. To resolve the question presented, it suffices to conclude that section 7451 does not itself restrict the Legislature’s authority to enact workers’ compensation legislation or otherwise conflict with article XIV, section 4.”

Cal Supreme Court Rules Uber-Lyft Proposition 22 Not Unconstitutional

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