A California labor law classifying Uber Technologies Inc. and Lyft Inc. drivers as independent contractors instead of employees reaches its final legal hurdle on Tuesday when the state Supreme Court hears arguments on the constitutionality of the voter-approved statute.<\/p>\n\n\n\n
The gig economy\u2019s fate hangs in the balance: On one end is the business model behind Uber, Lyft, and DoorDash Inc.<\/a>, which poured more than $200 million into their campaign to keep drivers classified as independent contractors.<\/p>\n\n\n\n On the other is the ability of over a million gig workers in California to receive employee benefits such as overtime pay and sick leave from the rideshare companies if the law, known as Proposition 22<\/a>, is overturned by the state\u2019s high court.<\/p>\n\n\n\n But the challenge to Prop. 22\u2014which California voters overwhelmingly approved in 2020 following the most expensive ballot initiative campaign in US history\u2014isn\u2019t just about worker classification. Castellanos v. State of California asks the justices to determine the constitutional bounds of California\u2019s uniquely powerful ballot initiative process.<\/p>\n\n\n\n Derived from a state constitutional amendment passed in 1911, the process gives voters some of the most powerful authority in the nation to pass new laws and amend existing ones without support from the legislature or governor. Critics say the method advantages big business, special interest groups, and wealthy activists who can afford to fund expensive, and extensive, campaigns.<\/p>\n\n\n\n In Castellanos, along with another pending state Supreme Court case concerning an anti-tax ballot measure, the panel\u2019s seven justices<\/a> could make sweeping changes to California\u2019s century-old voter right. The justices on May 8 heard arguments in Legislature of the State of California v. Weber<\/a> over the constitutionality of a measure that would require voters to approve most new state or local taxes.<\/p>\n\n\n\n \u201cThe usual rule is that you can do almost anything with the initiative,\u201d said David A. Carrillo, executive director of UC Berkeley Law School\u2019s California Constitution Center. \u201cThese two cases, individually or together, could really sharpen the definition of \u2018almost.\u2019\u201d<\/p>\n\n\n\n Prop. 22 was the rideshare app industry\u2019s response to a 2019 law passed by the state legislature, codifying a legal test for classifying wage-earning workers as employees, entitling them to minimum wage, sick leave, and unemployment insurance.<\/p>\n\n\n\n The ballot initiative carved out from that measure gig workers\u2014meaning most app-based rideshare and delivery drivers\u2014allowing companies such as Uber and Lyft to keep their overhead costs low.<\/p>\n\n\n\n The companies and some rideshare drivers argue Prop. 22 gives workers greater flexibility while also more benefits than usually afforded to independent contractors, such as accident insurance and health-care subsidies. \u201cAll of the risk is put on the shoulders or the backs of the workers,\u201d said Leonard Sansanowicz, a Woodland Hills, Calif., attorney who represents employees. \u201cAnd the only tangible benefit the companies offer is, \u2018You can make your own schedule. You are your own boss. You have entrepreneurial spirit.\u2019 But it\u2019s not really the case, because these folks are using rideshare apps, and they have requirements by the company.\u201d<\/p>\n\n\n\n Labor advocates also say the Prop. 22 strategy could be used to erode worker protections elsewhere. \u201cOther industries could get a ballot initiative saying that custodial workers are working on their own and value flexibility and should be considered independent contractors,\u201d said Daniel Ocampo, staff attorney at the National Employment Law Project.<\/p>\n\n\n\n Voter initiatives have long shaped the state\u2019s labor laws and how they\u2019re litigated, said Kristin Halsing, an employer-side attorney with Faegre Drinker Biddle & Reath LLP.<\/p>\n\n\n\n For example, a 2004 voter initiative limited who can sue entities for breaking California\u2019s Unfair Competition Law. And an initiative to repeal the Private Attorneys General Act\u2014a unique California labor law that lets workers sue employers as deputies of the state\u2014is on the November 2024 ballot.<\/p>\n\n\n\n But the specific legal dispute over Prop. 22 has much more to do with a century-old state constitutional provision than with the intricacies of labor policy.<\/p>\n\n\n\n Drivers and the Service Employees International Union sued to block the law in 2021, arguing that Prop. 22 interferes with a 1918 constitutional amendment that gives the legislature \u201cunlimited\u201d power to oversee a workers\u2019 compensation system.<\/p>\n\n\n\n A trial court found Prop. 22 unconstitutional, but a state appeals court last year largely overturned the ruling<\/a>, finding that voter initiatives dealing with workers\u2019 compensation don\u2019t violate the constitution.<\/p>\n\n\n\n Carrillo, of UC Berkeley, argued in an amicus brief before the state Supreme Court that Prop. 22 is valid because voters and the legislature share policymaking power. The constitutional amendment in dispute sought to prevent courts\u2014not the voters\u2014from rolling back workers\u2019 compensation laws, he argued.<\/p>\n\n\n\n John Matsusaka, executive director of the Initiative and Referendum Institute at the University of Southern California, said a ruling overturning Prop. 22 could have broader consequences for California\u2019s direct democracy.<\/p>\n\n\n\n \u201cYou could make these kinds of arguments and judges could come in and strike down anything,\u201d he said. \u201cIt would be open season.\u201d<\/p>\n\n\n\n But opponents of Prop. 22 say the constitutional amendment is clear that the legislature\u2019s power over workers\u2019 compensation is \u201cunlimited by any provision of this Constitution,\u201d which includes the ballot initiative.<\/p>\n\n\n\n Prop. 22 \u201ctook away what would be the legislature\u2019s right,\u201d said Lorena Gonzalez of the California Labor Federation and a former state assembly member. The rideshare companies could have brought a ballot initiative to change the constitution, but they didn\u2019t, she said.<\/p>\n\n\n\nCost of Business<\/strong><\/strong><\/h2>\n\n\n\n
Other drivers and unions argue that the law improperly shifts the cost of doing business onto gig workers and denies them other protections to which they should be entitled.<\/p>\n\n\n\nScope of the Initiative<\/strong><\/strong><\/h2>\n\n\n\n
Direct Democracy<\/strong><\/strong><\/h2>\n\n\n\n