California Supreme Court rules there is no conflict between Prop. 22 and the state Constitution

Sacramento, CA (WorkersCompensation.com) — In 2020, California voters passed Proposition 22, which later became Business and Professions Code Section 7451. That law rolled back an earlier law in the Golden State that attempted to classify “gig workers,” such as Uber and Lyft drivers and DoorDash dashers, as employees, rather than independent contractors for purposes of workers’ compensation law.

Last week, the California Supreme Court affirmed the measure in Castellanos v. State, 2024 WL 3530208 (Cal. 07/25/24), holding that Section 7451 (formerly Prop 22) did not violate the California Constitution’s legislative powers provisions.

Quick refresher

The law that repealed Proposition 22 was passed in 2019 and went into effect in early 2020. The law stated that a worker was independent contractor only if the hiring entity had established the following:

(1) The employee was free from the control and direction of the hirer in connection with the performance of the work, both under the contract and for the performance of the work and in fact.

(2) The employee has performed work that falls outside the normal business operations of the hiring entity.

(3) The employee was ordinarily engaged in an independently established trade, profession or business of the same nature as that which the employee engaged in for the hiring entity.

In response, Section 7451 provides that an app-based driver is self-employed and not an employee or agent if:

(1) The network operator shall not unilaterally prescribe specific dates, times of day or a minimum number of hours during which the app-based driver must be logged into the network operator’s online-enabled application or online platform.

(2) The Network Company shall not require the app-based driver to accept a specific request for a ride-sharing or delivery service as a condition for maintaining access to the Network Company’s online application or platform.

(3) The network company does not prohibit the app-based driver from performing ride-sharing services or delivery services through other network companies except during the agreed time.

(4) The network operator shall not prohibit the app-based driver from working in any other lawful profession or business.

A lawsuit followed, challenging Proposition 22 on the grounds that it limited the state legislature’s authority to extend workers’ compensation benefits to app-based drivers. At trial, the court agreed.

On appeal, the court overturned the ruling, leading to an appeal to the California Supreme Court.

The law in question

Under Article XIV, Section 4 of the California Constitution, the state legislature has “full power to create and enforce a complete system of workers’ compensation.” The question arising in the case was whether Proposition 22 violated that constitutional provision.

What did the California Supreme Court say?

In view of the case of Independent Energy Producers Association v. McPherson, 136 P.3d 178 (Cal. 2006), the court held that the power of the legislature was not exclusive of the power to initiate legislation, even though the Constitution referred to “unlimited” authority.

“We have concluded that the ‘unlimited’ clause is ambiguous and that there is no textual or historical basis for interpreting it as applying exclusively to the power of initiative,” the court wrote.

Furthermore, the court explained that interpreting the power of Article XIV, Section 4 as exclusive “would unnecessarily limit the power of initiative to effectively give the Legislature a first-mover advantage, thereby precluding the electorate from overturning any action the Legislature takes. … Accordingly, the people may modify existing workers’ compensation policies without running afoul of Article XIV, Section 4.”

The court therefore concluded that Proposition 22 did not violate the California Constitution.