A California Court of Appeals recently addressed challenges to Proposition 22, the Protect App-Based Drivers and Services Act, and concluded that it will largely remain in effect, at least for now.
Whether app-based drivers are independent contractors or employees has always been an area of contention.
In 2019, Assembly Bill 5 was passed, a California statute that expanded the landmark Dynamex decision, and established a new test for how businesses in California must classify workers. Under the AB 5 test, app-based drivers would be classified as employees, rather than independent contractors, a change not favorable for app-based companies like Uber, Lyft, and DoorDash. To resolve this problem, Proposition 22 came to be, a ballot initiative led by app-based companies that allowed for app-based rideshare and delivery of goods companies to classify their drivers as independent contractors if certain conditions were met.
In November 2020, voters approved Proposition 22. But similar to when AB 5 was passed, Proposition 22 was not loved by all. Soon after it was approved, various individuals and groups challenged it, arguing it was invalid because it violated the California Constitution. The trial court ruled that the proposition (1) was invalid in its entirety because it intruded on the Legislature’s exclusive authority to create workers’ compensation laws; (2) was invalid to the extent it limited the Legislature’s authority to enact legislation to amend Proposition 22; and (3) was invalid in its entirety because it violated the single-subject rule for initiative statutes.
Proponents of Proposition 22 and the State appealed, arguing the trial court was mistaken on all three points.
Castellanos v. State of California Decision
In Castellanos, et al. v. State of California, et al., the Court of Appeal for the First Appellate District held that Proposition 22 does not intrude on the Legislature’s workers’ compensation authority or violate the single-subject rule. It did find, however, that the initiative’s definition of what constitutes an amendment violates separation of powers principles. Since the unconstitutional provisions regarding the Legislature’s power to amend Proposition 22 can be severed, the Court of Appeal affirmed the lower court’s judgment only insofar as it declared those provisions invalid. But it reversed the remainder of the judgment, finding that the remaining portions of Proposition 22 would remain in effect.
The Castellanos decision will likely be appealed to the California Supreme Court. This means that for now, ride-share and delivery companies can continue classifying drivers as independent contractors, so long as they meet the qualifications set forth in Proposition 22.