In 2020, California voters passed Proposition 22, otherwise known as the Protect App-Based Drivers Act (the Propositiont), exempting app-based drivers for companies like Uber, Lyft, and Instacart from a 2019 law known as AB5. AB5 narrowed the circumstances under which many workers can be considered “independent contractors,” thereby codifying the holding in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamex). Proposition 22 if passed would allow app-based driver companies to continue classifying their drivers as “independent contractors” and exclude them from workers’ compensation coverage in California.
Individual drivers, with the support of Labor Union SEIU and others, filed suit arguing that the Proposition was unconstitutional. They contended that the Proposition violated the legislature’s exclusive authority to create workers’ compensation law and prevented the legislature from enacting law contrary to the Proposition, other than by amendment to the law itself. Therefore, they argued, this violated the legislature’s “plenary power” to “create and enforce a complete system of workers’ compensation.”
Alameda County Superior Court Judge Frank Roesch granted the petitioners’ writ of mandate and ruled the Act was invalid in its entirety. However, the First Appellate District, Division 4 reversed the decision of the Superior Court. They held that the entire Act was not invalid, but agreed that certain provisions of the Act were nevertheless invalid for violating the separation of powers regarding what future legislation might constitute an “amendment” of the Act.
Finally, the case came before the California Supreme Court. In Castellanos v. State of California ((2024) 16 Cal. 5th 588), the California Supreme Court affirmed the appeal court’s ruling, concluding that the Act does not conflict with Article XIV §4 of the California Constitution, because the legislature’s power to enact workers’ compensation laws is not exclusive. Further, it is constitutional for voters to use the ballot initiative power to “legislate on matters affecting workers’ compensation.” The Supreme Court noted that the workers’ compensation system is entirely statutorily based, and that nothing in the California Constitution negates the power of the people to enact provisions that exempt classifications of workers from that system; indeed the Court noted that the California Constitution does not require that every worker be covered by workers’ compensation. Citing previous opinions, the Court recognized that it is the “solemn duty” of the courts to “jealously guard the precious initiative power and to resolve any reasonable doubts in favor of its exercise.”
Ultimately, this decision confirms that drivers for Uber, Lyft, Instacart, and other app-based industries are not employees, and so are not entitled to workers’ compensation. The Supreme Court’s conclusion that the legislature maintains its power to enact a complete system of workers’ compensation laws, but voters can also approve ballot initiatives that can enact workers’ compensation laws, has interesting long-term implications for the California worker’s compensation system. The decision rather explicitly confirms the statutory nature of the workers’ compensation system and that nothing in the decision prevents the legislature from revisiting the issues presented in Castellanos on its own. Stay tuned; as app-based industries continue to expand and further cement their positions in our daily norms, the legislature is likely to continue to try to assert itself on the topic.
