Disagreeing with a lower court’s earlier decision, the California Court of Appeal on March 13, 2023 ruled that ‘Proposition 22’ is mostly constitutional. Although Uber, Lyft and aggregate companies are treating this as a huge victory, the court’s decision also raised the possibility of a California Supreme Court petition.
What is the Proposition 22?
Proposition 22 or Prop. 22 is a ballot initiative (a means through which state laws can be enacted/ repealed) that took place in California in November, 2020. The law allows app-based transportation and delivery companies like Uber, Lyft, and DoorDash to classify their drivers as ‘independent contractors’ instead of ‘employees.’ This means that if the law is enacted, drivers will not be entitled to certain employee benefits and protections such as minimum wage, overtime pay, and workers’ compensation.
While supporters of Prop. 22 argued that it would give drivers more flexibility in their work, opponents said it would harm workers and give companies too much power to avoid labor laws. Earlier, a trial court had declared Prop. 22 as invalid for violating the California constitution. Now, the Appeals Court has taken a new direction of ‘mostly constitutional.’
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Why this matters: Back when gig work first began, it was seen as an additional source of income or job opportunity. It worked for the companies as well because unlike a taxi company owner, for example, these aggregate companies do not have liability in such situations. However, in recent times we see that while companies continue to refer to drivers as ‘partners’ or ‘entrepreneurs,’ the workers see themselves as employees. Workers in India have also been asking for a social welfare scheme and regularisation of jobs. Now, the Appeal Court’s recent decision which can have implications when similar demands get the limelight in India.
What did the trial court say? After the Prop.22 was passed the Service Employees International Union (SIEU) and other filed a petition seeking to declare the law as invalid – a plea that the trial court granted. The court termed the proposition invalid because it “intruded on the Legislature’s exclusive authority to create workers’ compensation laws.” Further, it said the proposition limits the Legislature’s authority to enact legislation and that it violates the single-subject rule for initiative statutes.
Court of Appeal says some provisions invalid: However, to this the Court of Appeal said “Proposition 22 does not intrude on the Legislature’s workers’ compensation authority or violate the single-subject rule, but we conclude that the initiative’s definition of what constitutes an amendment violates separation of powers principles.”
Suggesting that the unconstitutional provisions can be severed from the rest of the initiative, the three-judge panel said, “we affirm the judgment insofar as it declares those provisions invalid.”
On the invalid provisions: While overturning the previous decision, the Court also said that Prop.22 violates Article XIV, Section 4 of the State Constitution that requires a complete system of workers’ compensation for employees. The court said that the law violates this requirement by excluding app-based drivers from this system.
Similarly, Article III, Section 3 of the State Constitution requires that the judicial branch of government have the power to determine employment status. As per the court, this Prop.22 “destroys the ability of app-based drivers to have their employment status determined within the judicial branch of government, it must also be invalidated as violative of Article III, section 3.”
As per Bloomberg Law, the SIEU will be considering approaching the Supreme Court for a review. Meanwhile, Lorena Gonzalez Fletcher, executive secretary-treasurer of the California Labor Federation, told Calmatters, “…The Appeals Court chose to stand with powerful corporations over working people, allowing companies to buy their way out of our state’s labor laws and undermine our state constitution,” “Our system is broken. It would be an understatement to say we are disappointed by this decision.”
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