California Supreme Court will take up challenge to gig worker classification law

LOS ANGELES (CN) — The California Supreme Court on Wednesday agreed to decide whether an Uber and Lyft-backed state law that allows the companies to classify their drivers as independent contractors passes constitutional muster.

Voters passed Proposition 22 in 2020, but the following year a trial judge found that it violated the California Constitution because, among other reasons, it intruded on the Legislature’s exclusive authority to create worker compensation laws. Then in 2022, a California appellate court mostly overturned the trial judge's findings, prompting the plaintiffs to ask the high court to take up the case.

“With Prop 22, the gig companies are violating our Constitution and undermining its spirit," Hector Castellanos, an Uber and Lyft driver and one of the plaintiffs in the lawsuit, said in a statement issued through the Service Employees International Union. "I'm grateful that the California Supreme Court is reviewing the case, and we are hopeful it will defend our state’s Constitution so that gig workers are treated with dignity and respect.”

Uber, Lyft and DoorDash funded the ballot initiative three years ago after California lawmakers passed Assembly Bill 5 in 2019. The law required the gig-economy businesses to classify their drivers and delivery workers as employees, entitled to paid sick leave, health insurance and other employee benefits under state law, rather than as independent contractors.

Lawmakers, in some cases backed by labor unions, have for years been trying to guarantee gig workers are provided with proper employee benefits. The companies, who depend on inexpensive labor to fuel their popularity and growth, have argued that they are unfairly targeted and that many of their drivers prefer the flexibility that comes with working as an independent contractor.

This year, the Ninth Circuit sided with Uber and reinstated its effort to block implementation of AB 5. Attorneys for the ride-hail company argued that Proposition 22 hadn't mooted their challenge to AB 5 because the constitutionality of the later law is still being challenged in state court.

In the federal case before the Ninth Circuit, Uber argued the California Legislature carved out so many exemptions under AB 5, from lawyers and doctors, to barbers, furniture assemblers and dog walkers that can be hired with the Wag! app, that in the end Uber and other gig-economy giants were arbitrarily singled out to overhaul their business models.

That argument resonated with the panel, which agreed Uber had made a tenable case that their exclusion from the wide-ranging exemptions, including for comparable app-based gig companies, could be attributed to animus rather than reason.

Around the same time that the Ninth Circuit revived Uber's federal lawsuit, the California Court of Appeals overturned the judge who had concluded that Proposition 22 was unconstitutional. In a split decision, the majority disagreed with the trial judge that state lawmakers had the exclusively authority to fashion workers' compensation laws.

Instead, the panel found the relevant section of the California Constitution did not involve the allocation of power between the Legislature and the electorate, but with ensuring that the lawmaking bodies jointly and severally have authority to create a worker compensation system.

"If the people enact an initiative statute to create or modify the workers’ compensation system, they have exercised the plenary, unlimited authority that article XIV, section 4 confers and satisfied that aspect of the Constitution," the majority held. "As courts must liberally construe the initiative power and resolve doubts in favor of the use of the initiative wherever reasonable, this is the interpretation of article XIV, section 4 that we must adopt."

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