California Appellate Panel Keeps Prop 22 Alive

Employment Law

In the ongoing litigation over Proposition 22, California’s voter-approved ballot measure that exempted ride-sharing companies from Assembly Bill 5, a state appellate panel affirmed in part a ruling that the proposition is invalid but severed the offending provision to keep the law in effect.

Enacted in November 2020, Prop 22 permitted app-based driving companies such as Uber and Lyft to classify their drivers as independent contractors and not employees.

The measure exempted ride-sharing companies from AB 5, a bill that codified the ABC test found in the California Supreme Court’s 2018 decision Dynamex Operations West, Inc. v. Superior Court of Los Angeles, which established a presumption that workers are employees unless the employer can affirmatively prove three different elements.

After Prop 22 took effect, four app-based drivers and a union challenged its constitutionality under the California Constitution.

Last year, Superior Court Judge Frank Roesch agreed with the plaintiffs that the ballot measure was unconstitutional and therefore unenforceable.

Prop 22 unconstitutionally limited “the power of a future legislature to define app-based drivers as workers subject to ‘workers’ compensation’ law,” impermissibly restricted amendment by the legislature (because it required a supermajority for changes) and violated the single-subject rule, he held.

Proponents of the measure appealed, and the appellate court largely upheld Prop 22, rejecting the trial court’s finding that the law intrudes on the legislature’s workers’ compensation authority and violates the single-subject rule.

However, the panel did determine that Prop 22’s definition of what constitutes an amendment violates separation of powers principles. Rather than strike down the entire law, however, the court severed that provision and left the rest of Prop 22 in place.

“[S]ections 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,” according to the panel. “As the trial court ruled and the parties agree, 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.”

To read the opinion in Castellanos v. State, click here.

Why it matters: The decision is the latest milestone in the twisting, turning saga that is worker classification in California. By severing the unconstitutional provision, the appellate panel kept Prop 22 in effect, allowing ride-sharing companies to continue to classify drivers as independent contractors, not employees. The likely next stop—the California Supreme Court.



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