California Superior Court Finds Proposition 22 Unconstitutional

As previously outlined here, on November 3, 2020, Californians passed a ballot initiative known as Proposition 22, or “the App-Based Drivers as Contractors and Labor Policies Initiative” (“Prop 22”), which asked voters to define app-based rideshare and delivery drivers as independent contractors, as opposed to employees.  Prop 22 was a direct response to the California Supreme Court’s decision in Dynamex v. Lee and the State Legislature’s passage of Assembly Bill 5, which made all workers presumptively employees who are entitled to the protections of wage-and-hour laws.  The passage of Prop 22—in large part due to the $200 million Uber, Lyft, DoorDash, and Instacart poured into a misleading ad campaign in favor of the ballot measure—paved the way for the adoption of labor and wage-and-hour policies tailored to rideshare and delivery drivers and the companies that hire them.

Specifically, following the passage of Prop 22, businesses in California were no longer required to pay large swaths of gig economy workers minimum wages or overtime.  Further, Prop 22 requires payment of those workers only for “engaged time,” or the time between receiving a request and dropping off the passenger or delivery, as opposed to payment for all hours worked.  In short, California gig workers lost two key protections (among myriad others) that California and federal law provide to all other employees.

Over the ensuing months, California gig workers quickly began to see the devastating and harmful effects of Prop 22 begin to unfold.  For example, in January 2021, Albertsons, the nation’s second-largest grocer, laid off in-house grocery delivery drivers at Albertsons-owned Vons, Safeway, and Pavilions locations throughout Southern California, and replaced them with lower-paid gig workers not entitled to overtime or payment for all hours worked as a result of Prop 22.

Just weeks ago, it seemed impossible to undo the damage caused by Prop 22—in particular, given the California Supreme Court’s refusal to hear a challenge to the new law in February 2021, instead directing the plaintiffs to the lower courts.  However, California gig workers (and all others, given apparent plans to take the show on the road to other states) were recently given a lifeline. 

On August 20, 2021, the Honorable Frank Roesch of the California Superior Court in Alameda County ruled that the ballot measure did not pass muster under the California State Constitution.  Specifically, the Court held that Section 7451 of the new law is unconstitutional “because it limits the power of a future legislature to define app-based drivers as workers subject to workers’ compensation law.”  As the Order explains, Prop 22 exempts workers not only from the protections of wage-and-hour laws, but also workers’ compensation; however, taking the power to make this determination away from the Legislature requires a constitutional amendment to Article XIV, Section 4 of the State Constitution.  Crucially, this cannot be accomplished through a ballot measure.  Per the Court’s Order, this renders the entire statute unconstitutional, as Section 7451 is not severable from the remainder thereof.  Notably, the Court also found Section 7465 unconstitutional “because it defines unrelated legislation as an ‘amendment’ and is not germane to [Prop] 22’s stated ‘theme, purpose or subject’” insofar as it may be interpreted to restrict the collective bargaining rights of gig workers deemed independent contractors.  While the Court’s ruling as to Section 7451 is alone sufficient to strike down the law, this ancillary holding gives the workers and unions challenging Prop 22 another arrow in their quiver as they prepare for an inevitable appeal.

Indeed, Prop 22 may very well be revived on appeal and continue to harm the workers it covers.  For now, though, Judge Roesch’s recent decision injects new hope into the movement led by unions and other worker advocacy groups to have Prop 22 taken off the books, and thus allow all employees to be paid fairly for their work.

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Faruqi & Faruqi, LLP focuses on complex civil litigation, including securities, antitrust, wage and hour, personal injury and consumer class actions as well as shareholder derivative and merger and transactional litigation. The firm is headquartered in New York, and maintains offices in California, Georgia and Pennsylvania.

Since its founding in 1995, Faruqi & Faruqi, LLP has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, direct purchasers, consumers and employees.

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About Alex Hartzband

Alex Hartzband's practice is focused on employment litigation. Alex is a senior associate in the firm's New York office.

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