On March 13, 2023, the California Court of Appeal for the First Appellate District reversed a lower court’s ruling which held that Proposition 22[i] was unconstitutional. Proposition 22[ii] was a ballot initiative put to the voters of California in 2020. As a result of the November 2020 state elections, the proposition[iii] became law, with 9,957,858 Californians voting to approve it. In essence, the proposition[iv] worked to classify workers for companies such as Uber, Lyft, and Doordash as independent contractors, rather than employees. This is an important distinction, as non-exempt employees in the state of California enjoy a wide variety of benefits that are not available to independent contractors, such as time-and-a-half overtime, paid sick time, paid meal breaks and unemployment insurance.

Ensuing Litigation

As expected, opponents of the proposition[v] resorted to litigation to declare the new law unconstitutional. In January of 2021, Hector Castellanos (“plaintiff”) as well as others, filed a petition for a writ of mandate in the Superior Court of the State of California for the County of Alameda[vi] seeking a declaration that Proposition 22[vii] violated the California Constitution[viii]. The trial court sided with plaintiff, ruling that Proposition 22 was 1) invalid in its entirety because it intrudes on the legislature’s exclusive authority to create workers compensation laws; 2) invalid to the extent that it limits the legislature’s authority to enact legislation that would constitute an amendment to the proposition[ix] and 3) invalid in its entirety because it violates the single-subject rule for initiative statutes.[x]

The State of California (“defendant”) as well as other proponents of the proposition[xi] appealed the ruling, arguing that the trial court was mistaken on all three of the previous holdings. The California Court of Appeal for the First Appellate District heard the case and agreed with defendant that the proposition[xii] did not intrude on the legislatures workers’ compensation authority or violate the single-subject rule.[xiii] That said, the Court of Appeal did conclude that Proposition 22’s[xiv] definition of what constitutes an amendment did violate principles of separation of powers.[xv] As such, the court held that the proposition[xvi] was, in part, unconstitutional. Nonetheless, Proposition 22[xvii] largely survived judicial scrutiny and was not declared unconstitutional in its entirety.

Takeaway

Companies such as Uber, Lyft, and Doordash are sure to celebrate the Court of Appeal’s ruling[xviii] on plaintiffs’ petition for a writ of mandate seeking to declare Proposition 22[xix] unconstitutional. This ruling[xx] will safeguard rideshare companies’ as well as food delivery service companies’ profitability in the coming years, as these companies will not have to classify their workers as employees. That said, the potential effect on the livelihood of hundreds of thousands of workers for these types of companies will be profound, as they will not be provided with the benefits that many workers in other roles enjoy. As such, plaintiff will likely petition the California Supreme Court for review to overturn the ruling of the Court of Appeal[xxi]. Only time will tell whether Proposition 22[xxii] will survive the gauntlet of the judicial review process or whether it will be struck down in its entirety as unconstitutional.

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Sources

[i] Proposition 22, 2019-2020 Leg. Sess. (November 2020)

[ii] Proposition 22, 2019-2020 Leg. Sess. (November 2020)

[iii] Proposition 22, 2019-2020 Leg. Sess. (November 2020)

[iv] Proposition 22, 2019-2020 Leg. Sess. (November 2020)

[v] Proposition 22, 2019-2020 Leg. Sess. (November 2020)

[vi] Castellanos et al. v. State of California et al. Case No. RG21088725, Alameda County Super. Ct. (January 2021)

[vii] Proposition 22, 2019-2020 Leg. Sess.

[viii] California Constitution

[ix] Proposition 22, 2019-2020 Leg. Sess. (November 2020)

[x] Alameda County Super. Ct.’s Ruling on Plaintiffs’ Petition for Writ of Mandate, Castellanos et al. v. State of California et al. Case No. RG21088725, Alameda County Super. Ct. (January 2021); First Dist. Ct. of Appeals Ruling on Plaintiffs’ Petition for Writ of Mandate, Castellanos et al. v. State of California et al. Case No. RG21088725, Alameda County Super. Ct. (January 2021) Supra, id at 2.

[xi] Proposition 22, 2019-2020 Leg. Sess. (November 2020)

[xii] Proposition 22, 2019-2020 Leg. Sess. (November 2020)

[xiii] First Dist. Ct. of Appeals Ruling on Plaintiffs’ Petition for Writ of Mandate, Castellanos et al. v. State of California et al. Case No. RG21088725, Alameda County Super. Ct. (January 2021) Supra, id at 2.

[xiv] Proposition 22, 2019-2020 Leg Sess. (November 2020)

[xv] First Dist. Ct. of Appeals Ruling on Plaintiffs’ Petition for Writ of Mandate, Castellanos et al. v. State of California et al. Case No. RG21088725, Alameda County Super. Ct. (January 2021). Supra, id at 2.

[xvi] Proposition 22, 2019-2020 Leg Sess. (November 2020)

[xvii] Proposition 22, 2019-2020 Leg Sess. (November 2020)

[xviii] First Dist. Ct. of Appeals Ruling on Plaintiffs’ Petition for Writ of Mandate, Castellanos et al. v. State of California et al. Case No. RG21088725, Alameda County Super. Ct. (January 2021).

[xix] Proposition 22, 2019-2020 Leg Sess. (November 2020)

[xx] First Dist. Ct. of Appeals Ruling on Plaintiffs’ Petition for Writ of Mandate, Castellanos et al. v. State of California et al. Case No. RG21088725, Alameda County Super. Ct. (January 2021).

[xxi] First Dist. Ct. of Appeals Ruling on Plaintiffs’ Petition for Writ of Mandate, Castellanos et al. v. State of California et al. Case No. RG21088725, Alameda County Super. Ct. (January 2021)

[xxii] Proposition 22, 2019-2020 Leg Sess. (November 2020)