The next step in the battle over Proposition 22 and AB5 in California unfolds Tuesday in an appellate court.
What’s at stake is the ruling from August 2021 by an Alameda County Superior Court judge that Prop 22, which blocks the imposition of AB5 among gig drivers for companies such as Uber (NYSE: UBER), Lyft and DoorDash, is unconstitutional.
That ruling by Judge Frank Roesch found that Prop 22 was unconstitutional because it conflicted with various aspects of the state’s workers’ compensation laws. But while the ruling overturned Prop 22, it also was stayed while the appeals process ran its course, meaning AB5 has been blocked from enforcement against gig driving companies.
The case on Prop 22, which pits individuals and unions against the state of California, will be heard in the 1st District Court of Appeals.
Prop 22 was solidly approved with 59% of the vote on Election Day 2020. The three aforementioned delivery companies poured a huge amount of money into the campaign, estimated by several news reports to be more than $200 million.
Although independent contractor law AB5 was directed at a wide range of companies, its proponents and the Swiss cheese pattern of exemptions granted by the state Legislature made it clear that the two industries it was mostly targeting were gig drivers and trucking. And when Prop 22 went into effect, until AB5 was implemented in trucking in August through a series of court actions, it meant that the law was hitting other industries that hadn’t gotten a carve-out while the two industries AB5 had targeted — trucking and gig workers — were both exempt because of Prop 22 in the case of gig workers or an injunction in the case of trucking.
Although Judge Roesch’s decision may have been found Prop 22 unconstitutional as a result of a conflict with aspects of the state’s workers’ compensation law, the counterargument that the groups appealing the decision are using is that the judge’s action illegally removed the general population — and their power of direct ballot initiative — from the equation.
In a conference call with reporters Monday, representatives of a pro-Prop 22 group called
Protect App-Based Drivers and Services said the issue is not the specifics of the workers’ comp law but rather the ability of the population to legislate via the initiative process.
On the call, Kurt Oneto, an attorney with Nielsen Merksamer who describes himself on his law firm’s website as a specialist in the California ballot initiative process, said there have been earlier cases in which the state’s Supreme Court has said the state’s constitution grants the Legislature “plenary absolute authority” that also “includes the power of the voters.”
State Attorney General Rob Bonta is the lead defendant in the case that led to the decision by Judge Roesch. Bonta opposed Prop 22 when it was on the ballot and before he was attorney general. But as attorney general now, he is the lead defendant, as it is the state’s initiative process that was targeted in the lawsuit filed by several individuals and unions and which prevailed at the lower court level.
Bonta’s office, in a brief filed more than a year ago, said Prop 22, “like any ballot initiative, is presumed to be valid. As our Supreme Court has described, the right of initiative is ‘one of the most precious rights of our democratic process,’ and thus the courts must ‘jealously guard’ and liberally construe this right.”
On the media conference call, two gig drivers were brought on to offer their own tales of how gig work has enabled them more flexibility in their personal lives and other professional pursuits.
Asked if these stories are germane to the legal argument, Oneto said briefs submitted in the case do include similar personal testimonies. “These arguments have been briefed and are before the court, and we hope they will take that into account,” he said.
AB5 is a law passed by the California Legislature and signed by Gov. Gavin Newsom in 2019 that sets the ABC test as the key factors for determining whether a worker is independent or should be considered an employee. The ABC test is seen as leaning heavily toward deciding a worker should be considered an employee.
The ABC test says a worker can be considered independent if:
- The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
- The worker performs work that is outside the usual course of the hiring entity’s business.
- The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
The B prong is the part of the ABC test that is considered most problematic for the trucking industry, given the number of trucking companies that hire independent owner-operators to haul freight.
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