Prop. 22 Ruled Unconstitutional in a Win for Gig Economy Workers

As of August 20^th, a California judge has declared the controversial ballot measure Proposition 22 unconstitutional and unenforceable. This is considered a major win for rideshare drivers and other gig economy workers, potentially making them eligible for employee benefits like insurance and minimum wage.

Prop. 22 is a ballot measure that allows companies like Uber, Lyft, and DoorDash to treat their drivers as independent contractors instead of agents or employees. Within months of the proposition passing, it was challenged by a coalition of app-based drivers and the Service Employees International Union (SEIU) on the basis that it violates the California state constitution.

It took seven months, but the presiding judge Alameda County Superior Court Judge Frank Roesch ruled that Prop. 22 was, in fact, unconstitutional. While rideshare and delivery app companies have already stated that they will appeal the decision, this ruling is a good sign for gig economy workers. Here’s what you need to know about Prop. 22, why it’s been ruled unconstitutional, and what the path forward may be for both the proposition and California rideshare drivers.

What Is Prop. 22?

Proposition 22 is a California ballot measure that designated app-based drivers as independent contractors instead of employees. It specifically overrides a previous law, Assembly Bill 5, which tightened California’s independent contractor laws.

The ballot initiative only applies to app-based drivers. This is defined as any worker who provides on-demand delivery services through a company’s online application. It was specifically created as a loophole law to excuse gig economy companies Uber, Lyft, DoorDash, InstaCart, and Postmates from following standard employment law and giving gig workers the standard benefits required by the state.

The History of Prop. 22

Proposition 22 was a response to Assembly Bill (AB) 5, a California bill that introduced tighter, more stringent guidelines for determining whether a worker may be considered a contractor. AB 5 introduced a three-factor test to judge if someone may be a contractor:

• The worker must be free from the hiring company’s direction while performing their work
• The worker must be doing work outside the company’s regular business
• The worker must be established in a trade or business similar to the work they do for the company elsewhere

This meant that rideshare drivers were no longer able to be classified as contractors. These drivers failed the second two factors. They were doing work that was core to Uber, Lyft, and DoorDash’s business model. Furthermore, many of these workers only worked for these companies and didn’t drive for any other business.

When AB 5 passed, Uber and Lyft representatives made it clear that they would not reclassify workers as employees instead of contractors. On August 10^th, 2020, after Todd M. Friedman and multiple other attorneys helped drivers sue, the Superior Court of San Francisco ruled that these companies violated AB 5. The California First District Court of Appeal upheld the ruling on October 22^nd, 2020, with the caveat that the ruling would only go into effect if Prop. 22 failed.

These companies had anticipated something like this and had begun working on their campaign for Proposition 22 a year before. The Prop. 22 ballot measure request was filed in October 2019. Their campaign, “Yes on Proposition 22,” received more than $205 million in funding. The majority of that funding came from companies with a vested interest in continuing to treat gig economy workers as contractors, including:

• Uber: $59.5 million
• DoorDash: $52.1 million
• Lyft: $49 million
• InstaCart: $31.6 million
• Postmates: $13.3 million

Meanwhile, the opposing campaign “No on Prop 22” received just $18.88 million from unions and assorted other workers’ rights organizations.

Proposition 22 was pitched to California voters as a way to protect gig economy jobs. The “Yes on Proposition 22” campaign claimed that app-based jobs would disappear without the proposition, and people would lose their livelihoods. The campaign was as successful as the funding disparity was large. On November 3^rd, 2020, voters approved the ballot measure 58% to 41%.

Why Prop. 22 Has Been Ruled Unconstitutional

That brings us back to the August 20^th decision. The SEIU and the rideshare drivers filed their initial lawsuit challenging Prop. 22 in the California Supreme Court on January 12^th, 2021. However, the state Supreme Court rejected a direct review, requiring the petitioners to first file the case in a lower court.

The SEIU and other petitioners refiled the lawsuit on February 11^th in the Alameda County Superior Court. The presiding judge Frank Roesch heard months of arguments from both sides covering the three primary claims before making a decision:

• Proposition 22 limited the legislature’s constitutional power to extend compensation benefits by requiring a 7/8ths legislative majority to amend the proposition
• The proposition included an overly broad definition of “amendment”
• The proposition violated the single-subject rule

Judge Roesch agreed with the first and third arguments. Regarding the first, Roesch wrote: “A prohibition on legislation authorizing collective bargaining by app-based drivers does not promote the right to work as an independent contractor, nor does it protect work flexibility, nor does it provide minimum workplace safety and pay standards for those workers. It appears only to protect the economic interest of the network companies in having a divided, ununionized workforce, which is not a stated goal of the legislation.” Regarding the third, he ruled that the proposition addressed more than a single subject, violating the state’s constitution.

Essentially, Judge Roesch found that the entirety of Proposition 22 is unenforceable because it limits the legislature’s power to pass relevant amendments. The 7/8ths majority required for the state legislature to amend the proposition is unheard-of, and it’s also a fundamental element of the proposition. Roesch’s ruling is crystal clear: he believes this proposition violates the state’s constitutional protections for legislative power. That’s hard to argue.

The Path Forward

This ruling is a major blow to the companies that funded the proposition. However, they have not yet given up the battle. Geoff Vetter, the spokesperson for Protect App-Based Drivers & Services Coalition (PADS), has stated, “We will file an immediate appeal and are confident the Appellate Court will uphold Prop 22.” PADS includes the companies Uber, Lyft, DoorDash, and Instacart.

Vetter’s statement also highlighted the non-binding nature of the Superior Court ruling. Upon the appeal, the current ruling will immediately be stayed, meaning that Prop. 22 will remain in effect until the appeal is either dismissed or ruled upon by the state Supreme Court.

For app-based drivers, this means that nothing is changing soon. The appeals process can take months or years to complete. However, gig economy workers can be hopeful. Prop. 22 was already a concession, offering these drivers more protections than they could access before AB 5. If the proposition is declared entirely unenforceable and unconstitutional, Uber and Lyft drivers could soon be eligible for all the benefits of any other California employee, from insurance to guaranteed minimum wage.

The Future Isn’t Certain, but It’s Looking Bright

The battle for gig workers’ rights is far from over. Companies like Uber and Lyft are battling worldwide to continue treating their workers as contractors and avoid paying for the benefits they’d otherwise be due. Still, rulings like the Alameda County Superior Court decision demonstrate that legislators are on the side of workers.

Of course, there’s no guarantee about how the appeal process will go. Still, gig workers in California should see this as an encouragement to pursue their own cases and fight for their rights to fair employment.