The California Supreme Court recently upheld Prop. 22 which lets Uber and other app makers to treat their drivers and delivery workers as independent contractors rather than employees.
The decision is heralded as a significant win for gig-work employers, and in Castellanos v. State of California, the Supreme Court affirmed the judgment of the Court of Appeal which said there was no conflict between Bus. & Prof. Code § 7451 and Cal. Const., art. XIV, § 4.
Background
In February 2021, app-based drivers and labor unions filed an action asserting that Prop 22. conflicted with the California Constitution. The plaintiffs argued that by entirely removing app-based drivers from the state’s workers’ compensation laws, § 7451 disagreed with the California Constitution, which vests the Legislature with “unlimited” power to govern workers’ compensation.
Moreover, the plaintiffs claimed that pursuant to the language of § 7467, if § 7451 is invalid, then all of Prop 22 was also invalid.
The Superior Court of Alameda County held that Prop. 22 was invalid in its entirety after finding its classification of drivers for app-based transportation or delivery companies as independent contractors under certain circumstances. This removed the drivers from the workers' compensation system, and Prop. 22 was unconstitutional and not severable.
The California Court of Appeal reversed, relying on a 2006 decision to conclude that the state constitution gives power to the Legislature and the electorate acting through the initiative power. As a result, Prop. 22 didn’t improperly conflict with the Legislature’s authority to enact workers’ compensation laws. The plaintiffs subsequently petitioned the California Supreme Court for review.
What Did the Supreme Court Say?
The Supreme Court found that because the Legislature's plenary power to legislate on workers' compensation isn’t exclusive, Article XIV, § 4 of the state constitution doesn’t preclude the public from voting on Prop. 22. The Court found that the public’s ability to legislate on matters affecting workers' compensation didn’t invalidate Bus. & Prof. Code, § 7451, even if the app-based drivers might have been employees under legislation codifying the ABC test (Labor Code § 2775(b)(1)).
Associate Justice Goodwin H. Liu wrote that the “unlimited” clause in Cal. Const., art. XIV, § 4, doesn’t apply just to the initiative power because it’s ambiguous, and there’s no basis for such construction.
Lui and the Supreme Court panel said that whether the operation of the two laws improperly constrain the Legislature's authority to enact future legislation wasn’t discussed in the unanimous opinion.
Under Bus. & Prof. Code § 7451, a driver for an app-based transportation or delivery company is an independent contractor and not an employee of the company provided several conditions are met. As a result of § 7451, app-based drivers aren’t covered by California workers' compensation laws, which generally apply to employees.
The Supreme Court agreed with the Attorney General that § 7451 doesn’t conflict with Article XIV, § 4 because the latter provision doesn’t prevent the citizens from exercising their initiative power to legislate on workers' compensation questions. Castellanos v. State of California (California Supreme Court, 7/25/2024).
Bottom Line
In light of the fact that Prop. 22 will remain on the books, app-based platform workers will continue to be ineligible for benefits like sick pay, a minimum wage for all time worked, and unemployment insurance.
Employers may continue to legally classify their drivers as independent contractors.