Prop. 22 governing gig workers found unconstitutional, but in effect

Ride-hail drivers remain independent contractors pending appeal by Uber

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This week’s question comes from Josh D. from Marin County. With our current 24-hour news cycle, it’s hard to keep up with all the important issues in our daily lives. It seems like Proposition 22 was an initiative constantly discussed five years ago that went away. Did Proposition 22 ever take effect?

Dear Josh: Thanks for reaching out. Many people may have forgotten about Prop. 22. On Aug. 20, Alameda County Superior Court Judge Frank Roesch ruled Prop. 22 to be unconstitutional.

Recall that Prop. 22, a ballot initiative passed by California voters in 2019, permitted many gig economy companies such as Uber, Lyft and DoorDash to classify their drivers as independent contractors instead of employees. These companies and others poured over $200 million into the campaign to pass Prop. 22.

The benefit to the companies in classifying drivers as contractors rather than employees is that it allows them to evade almost every regulation in place governing how companies treat their employees, as well as most costs associated with having employees. These include health insurance benefits, minimum wage laws, safety regulations, workers compensation insurance, etc.

Relating specifically to drivers, the companies would be excused from paying employees mileage and reimbursing them for the cost of gasoline and vehicle maintenance. The cost savings to these companies would have been in the billions of dollars annually. The downside, of course, is that drivers would have to pay for their own health insurance coverage and would have almost none of the benefits that most full-time employees receive. The cost savings to the companies gets shifted to the drivers, as expenses to them.

Prop. 22 was far reaching and expansive in its language and in the sheer number of components it included. For instance, it also contained language that would prohibit drivers from forming a union. For that reason, as well, the judge wrote, Prop. 22 violated the constitutional requirement that ballot initiatives be limited to a single subject.

Relative to the point prohibiting unionization, Roesch wrote that it “appears to only protect the economic interests of the network companies in having a divided, un-unionized workforce, which is not a stated legal goal of the legislation.”

Roesch is saying that the drafters of Prop. 22 overreached both on process and in substance.

Prop. 22 was created as a ballot initiative by gig-worker companies as a direct response to Assembly Bill 5, a law passed by the California Legislature and signed by Gov. Gavin Newsom. AB 5 would have required these companies to classify drivers as employees, thus granting them benefits including minimum wage protections, workers compensation insurance, overtime pay, etc.

Much of the basis for Roesch’s ruling in finding Prop. 22 unconstitutional rests largely on the idea that in California, in accordance its Constitution, only the Legislature can, for example, regulate compensation for workers’ injuries. The goal cannot be accomplished through a ballot initiative process because the Constitution grants that right exclusively to the Legislature.

In essence, Roesch said that Prop. 22 took that power away from the Legislature, thereby violating the Constitution. In his ruling, Roesch also said California voters have the power to make such a change to the Constitution, but, “If the people wish to use their (ballot) initiative power to restrict or qualify a plenary and unlimited power granted to the Legislature, they must do so by (a ballot) initiative constitutional amendment, not by (a ballot) initiative statute.”

Voters would have to amend the Constitution first, amending it to permit, in effect, the passage of legislation through ballot initiatives. Neither the voters nor the Legislature have thus far amended the Constitution in such a manner. The state Legislature followed the Constitution in properly passing AB 5 through the legislative process as dictated by the Constitution. Prop. 22’s authors and backers did not, thereby violating the Constitution.

Ride-hail giant Uber has filed an appeal and requested a stay on Roesch’s ruling until the appeal is complete. While it pending, Roesch’s order does not yet take effect. For now, at least, these companies do not have to classify drivers as employees and can continue to use them as independent contractors, saving billions of dollars in costs, to the detriment of their drivers.

Christopher B. Dolan is the owner of Dolan Law Firm, PC. Matt Gramly is a senior litigation attorney in our San Francisco office. We serve clients throughout the Bay Area and California from offices in San Francisco, Oakland and Los Angeles. Email questions for future articles to: help@dolanlawfirm.com. Each situation is different, and this column does not constitute legal advice. We recommend that you consult with an experienced trial attorney to fully understand your rights.

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