The California Court of Appeals Upholds Proposition 22 (2020)

Explaining the Court's Ruling and what it means for Californians

In 2019, the California State Legislature rushed through a statute, AB-5, at behest of the state’s most powerful labor unions to classify nearly every independent contractor in the state as full-time employees.¹ AB-5 has proven extremely unpopular with Californians, leading to numerous subsequent legislative revisions exempting hundreds of various professions.

In 2020, Uber and Lyft sponsored a ballot measure to exempt ride share app workers from classification as full-time employees and introduced a comprehensive regulatory scheme for app workers. The proposed law made it so that any legislative amendments would require a 7/8ths legislative majority and would not allow for any legislative change to classify app workers as fulltime employees. The initiative, known as Proposition 22, passed with nearly 59% of the vote, rebuking the California State Legislature.²

Having been handily defeated at the ballot box, opponents of Proposition 22 turned to the courts to enforce their chosen public policy choices over the will of the electorate. They had initially succeeded, finding a sympathetic superior court judge to rule in their favor. However, on Monday, March 13, the California Court of Appeals reversed the lower court and mostly upheld the constitutionality of Proposition 22.³

Because most news organizations have not bothered to link to the case itself (linked in the previous footnote) and have not reported fully on the law, many may be asking themselves the following question: What did the Court of Appeals actually do?

First, the Court upheld nearly all of Proposition 22, rejecting challenges to it as an unconstitutional usurpation of power from the California State Legislature under Section 4 of Article XIV of the California Constitution⁴ and as a violation of the constitutional single subject rule.⁵ Although the news media did not mention, the superior court evaluating the constitutionality of Proposition 22 was obligated to follow the California Supreme Court.⁶

App share workers will remain independent contractors and not be classified as full-time employees.⁷ The California State Legislature will not have any power to change that law under any circumstances.⁸ The regulatory scheme remains in effect and can only be changed by the California State Legislature through a 7/8ths majority vote.⁹

The 7/8 legislative majority requirement for future legislative amendments is also fully constitutional.¹⁰ To uphold the constitutionality of Proposition 22, the Court of Appeals followed long-standing California Supreme Court precedent that both the superior court ignored in its decision and the news media continues to ignore in its coverage of Proposition 22.¹¹

Second, the Court of Appeals struck down two provisions of Proposition 22, Section 7465(c)(3) and Section 7465(c)(4), as unconstitutional, on the grounds of violating the separation of powers. These two provisions defined what constituted an amendment to Proposition 22.

Section 7465(c)(3) provides that “Any statute that prohibits app-based drivers from performing a particular rideshare service or delivery service while allowing other individuals or entities to perform the same rideshare service or delivery service, or otherwise imposes unequal regulatory burdens upon app-based drivers based on their classification status, constitutes an amendment” and cannot be enacted without a 7/8 majority vote of the State Legislature.¹²

Section 7465(c)(4) provides that “Any statute that authorizes any entity or organization to represent the interests of app-based drivers in connection with drivers’ contractual relationships with network companies, or drivers’ compensation, benefits, or working conditions, constitutes an amendment” and cannot be enacted without a 7/8 majority vote of the State Legislature.¹³

While many pundit-journalists are declaring that this case will be heard by the Supreme Court, that is not guaranteed as the California Supreme Court has discretionary review in most cases.¹⁴ And at least on two of the issues upholding the constitutionality of the law, the voters’ initiative authority and the single subject rule, there is almost no need for the California Supreme Court to hear the case.¹⁵

However, there is a possibility that the California Supreme Court might grant review to take up the issues of whether Section 7465(c)(3) and Section 7465(c)(4) violated the constitutional separation of powers. Both present issues of first impression. And both are likely to arise again in the context of legislation regulating the gig economy.

For my own part, I completely agree with the Court of Appeals that Proposition 22 is constitutional and will write separately to say why the Supreme Court would almost certainly affirm if they agreed to review the case. I am uncertain about whether Section 7465(c)(3) and Section 7465(c)(4) are unconstitutional and how the Supreme Court would rule is anyone’s guess. I will write separately more in depth about those two provisions and the future to legislate in the of app-workers and the gig economy.

1. The author of this article is an attorney licensed to practice in the State of California and the District of Columbia. This article and all of the works on this Substack page are statements of the opinions of the author, only, and do not constitute legal advice; they are not intended to be relied upon by any individual or entity in any transaction or other legal matter, past, pending, or future. A paid subscription to this Substack page supports the author's scholarship and provides access to research that the author has compiled, but does not establish an attorney-client relationship. The author does not accept unsolicited requests for legal advice or representation, and this Substack page is not intended as legal advertising. The opinions expressed on this Substack page reflect the personal views of the author only.

2. https://elections.cdn.sos.ca.gov/sov/2020-general/ssov/ballot-measure-summary.pdf

3. https://www.courts.ca.gov/opinions/documents/A163655.PDF