App-Based Companies Say They'll Appeal Ruling That Prop. 22 Is Unconstitutional

“It is a slippery slope to begin to define statewide employee benefits differently, subject to different industries and work practices, when it comes to workers' compensation benefits,” Gurvey said.

Originally published by WorkCompCental as authored by Mark Powell on August 24, 2021

Representatives from app-based driving companies who do business in California said they are appealing a ruling from a superior court judge who said a relatively new law that allows them to classify drivers as independent contractors is unconstitutional.

An Alameda County Superior Court judge on Friday ruled that Proposition 22 is unenforceable because it restricts state lawmakers’ ability to make contractors and so-called gig workers eligible for workers’ compensation.

In his ruling, Judge Frank Roesch wrote that Prop. 22 is an “unconstitutional continuing limitation on the Legislature's power to exercise its plenary power to determine what workers must be covered or not covered by the workers' compensation system.”

“If the people wish to use their initiative power to restrict or qualify a ‘plenary’ and ‘unlimited’ power granted to the Legislature, they must first do so by initiative constitutional amendment, not by initiative statute,” Roesch wrote.

The California Supreme Court in February declined to hear a constitutional challenge to Prop. 22 but left an opening for plaintiffs, led by the Service Employees International Union, to file a complaint in a lower court.

In November 2020, California voters passed Prop. 22, which exempts app-based driving employers from a state law that requires most companies to classify workers as benefit-eligible employees, not contractors.

Uber, Lyft and similar companies spent more than $200 million to promote Prop. 22, which passed with more than 58% of the vote.

Uber spokesman Noah Edwardsen criticized Roesch’s ruling, saying it “ignores the will of the overwhelming majority of California voters and defies both logic and the law.”

“We will appeal and we expect to win,” Edwardsen said in a statement. “Meanwhile, Prop. 22 remains in effect, including all of the protections and benefits it provides independent workers across the state.”

The proposition was drafted in response to Assembly Bill 5, which lawmakers passed in 2019. AB 5 requires California employers to treat most workers as employees, though the Legislature later passed amendments exempting some professions.

Under Prop. 22, app-based driving companies must provide occupational accident insurance in lieu of workers’ comp. 

The law requires accident policies to cover up to $1 million in medical expenses and provide temporary disability payments equal to two-thirds of a driver's average weekly wages.

The proposition, however, does not require permanent disability benefits and does not include any vocational rehabilitation or return-to-work programs that are comparable to what’s available in California’s workers’ comp system.

Prop. 22 also allows lawmakers to amend its provisions, but only with a seven-eighths majority approval in both houses of the Legislature before voters can approve or deny changes.

Geoff Vetter, spokesman for pro-Prop. 22 group Protect App-Based Drivers & Services Coalition, said he is confident that the law will be upheld on appeal. And until the appeals process is finished, Prop. 22’s provisions will remain in place because Roesch’s ruling is not binding. 

“We believe the judge made a serious error by ignoring a century’s worth of case law requiring the courts to guard the voters’ right of initiative,” he said. “This outrageous decision is an affront to the overwhelming majority of California voters who passed Prop. 22.” 

Jim Pyatt, an app-based driver from Modesto, also released a statement through the organization, calling the ruling “wrong and disrespectful” to rideshare workers and delivery drivers who supported the proposition.

“It’s clear that the special interests behind this frivolous challenge are attacking the overwhelming will of the voters and the decisive wishes of drivers who fought to remain independent,” he said. “They want to strip drivers’ ability to work as independent contractors and want to eliminate the historic new benefits offered by Prop. 22, including the earnings guarantee, health care and more. It’s shameful.”

Injured-worker advocates, however, said they aren't surprised by Roesch’s ruling. They said they’re hopeful that his finding and subsequent decisions in the case will show current law dictates that workers be treated equally across industries.

“We are obviously encouraged by the trial court’s recent ruling that this proposition is an unconstitutional attempt to remove from the Legislature the ability to create a system of workers’ compensation by altering the definition of employee,” said Justin Sonnicksen, co-chair of the California Applicants’ Attorneys Association's Amicus Committee and partner at Gearheart and Sonnicksen in Pleasant Hill. “Our organization supported the passage of AB 5 in 2019, and last year we actively opposed the efforts of the corporate special interests who spent millions of dollars on a misleading marketing campaign to create a permanent underclass of workers to service their industry.”

Sonnicksen said CAAA will continue to follow the appeals process and may submit an amicus brief at the Court of Appeals or Supreme Court level.

When stakeholders were debating Prop. 22 last year, some feared it would create a process for picking and choosing benefits for certain workers, which would put the new law on “thin ice” constitutionally, said Alan Gurvey, an applicants' attorney and managing partner of Rowen, Gurvey & Win in Sherman Oaks.

Gurvey said AB 5 and the case law that inspired it resulted in basic legal reasoning for categorizing workers and providing statutory definitions that case law had also addressed.

“From a workers' compensation perspective, it seems that once a worker is defined as an employee, he or she should be afforded all rights and entitlements of employees, which includes workers' compensation benefits,” Gurvey said.

While deep-pocketed companies were able to convince voters that their benefit offerings were sufficient alternatives to workers’ comp and other protections, existing statutes and case law provide precedent and legal bases for “equal rights to all employees,” he said.

“It is a slippery slope to begin to define statewide employee benefits differently, subject to different industries and work practices, when it comes to workers' compensation benefits,” Gurvey said.

Determining whether Prop. 22 is ultimately constitutional may not be an easy question to answer, said Michael Duff, a University of Wyoming professor who is currently working as a visiting professor at the Saint Louis University School of Law.

Some state constitutional provisions were adopted more than a hundred years ago, and their authors may not have anticipated the current initiative process by which Prop. 22 was passed, Duff said.

The question of constitutionality also centers around whether there is a conflict between state workers’ comp provisions and California’s initiative process, which also is constitutional, he said.

“My assessment from a distance and not being a California lawyer is that there is this kind of entanglement of meanings that’s really produced by different historical contexts,” Duff said. “Once you set that provision in its particular historical context, I question whether it's actually in conflict with the statute involving initiative laws.”

In other settings, if a statute is in conflict with a constitution, “obviously” the statute yields, he said. 

“But when you’re saying there are two constitutional provisions that are in conflict, that is something that courts have to straighten out,” Duff said. “I suspect they are not in conflict because I think the role of the Legislature is being used in two very different ways.”

When asked what relevance “the will of the people” has in this particular legal setting, Duff replied, “It depends on what state you’re in.”

“I think in California it has a lot of relevance, because California has a constitutional provision that talks about how initiative statutes are protected under the state Constitution,” he said. “So, obviously, California cares about the will of the people. But there’s this process that is set up where people actually can initiate this statute, and then there is a way for the Legislature to amend, to alter. And, then as I understand it, that gets taken back to the people.”