Uber, Lyft, DoorDash Prevail in AB 5 – Prop 22 Appeal

Los Angeles, CA (WorkCompAcademy) In 2019, the California Legislature enacted Assembly Bill No. 5, which established a new test for distinguishing between employees and independent contractors for the purposes of the Labor Code and Unemployment Insurance Code.

In response, Davis White and Keith Yandell, supported by a group called Protect App-Based Drivers and Services proposed Proposition 22. Among the supporters of Protect Drivers and Proposition 22 were rideshare and delivery network companies such as Uber Technologies, Inc., Lyft, Inc., and DoorDash, Inc.

The voters approved Proposition 22 in November 2020, with 58.6 percent of voters in favor and 41.4 percent opposed. It added sections 7448 to 7467 to the Business and Professions Code.

Shortly afterwards, Hector Castellanos, Joseph Delgado, Saori Okawa, Michael Robinson, Service Employees International Union California State Council, and Service Employees International Union filed a petition for writ of mandate seeking a declaration that Proposition 22 is invalid because it violates the California Constitution.

The trial court granted the petition, ruling that the proposition (1) is invalid in its entirety because it intrudes on the Legislature’s exclusive authority to create workers’ compensation laws; (2) is invalid to the extent that it limits the Legislature’s authority to enact legislation that would not constitute an amendment to Proposition 22, and (3) is invalid in its entirety because it violates the single-subject rule for initiative statutes.

It issued a judgment ordering Katie Hagen, as director of the Department of Industrial Relations, not to enforce any of Proposition 22’s provisions.

Proposition 22’s proponents and the state appealed, arguing the trial court was mistaken on all three points.

The Court of Appeal agreed that Proposition 22 does not intrude on the Legislature’s workers’ compensation authority or violate the single-subject rule. But it concluded that the initiative’s definition of what constitutes an amendment violates separation of powers principles. Because the unconstitutional provisions can be severed from the rest of the initiative, it affirmed the judgment insofar as it declares those provisions invalid and to the extent the trial court retained jurisdiction to consider an award of attorney’s fees, and otherwise reversed in the published case of Castellanos v. State of California - A163655 (March 2023).

By placing the eligibility of app-based drivers for workers’ compensation benefits off-limits to amendment by the Legislature, Proposition 22 seeks to override constitutional responsibility delegated to the Legislature.

Thus the Court of Appeal concluded that sections 7465(c)(3) and (4) are facially invalid on separation of powers grounds because they intrude on the judiciary’s authority to determine what constitutes an amendment to Proposition 22, and section 7465(c)(4) fails for the additional reason that it intrudes on the Legislature’s authority by artificially expanding Proposition 22’s article II, section 10(c) shadow.

However, the proper remedy for the separation of powers violation is to sever section 7465(c)(3) and (4) and allow the rest of Proposition 22 to remain in effect, as the voters indicated they wished. (§ 7467, subd. (a).) rather than strike Proposition 22 in its entirety.

"The judgment is affirmed to the extent it declared sections 7465(c)(3) and (c)(4) invalid and to the extent the trial court retained jurisdiction to consider a motion for attorney fees under Code of Civil Procedure section 1021.5. In all other respects, the judgment is reversed. The matter is remanded to the trial court with instructions to enter a new judgment not inconsistent with this opinion."

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