Court keeps most of Prop 22 in win for Uber and Lyft

By Kellen Browning | New York Times

A California appeals court said Monday that Proposition 22, the vote passed by state voters in 2020 that classified Uber and Lyft drivers as independent contractors rather than employees, should remain state law.

The ruling by three appeals court judges overturned last year’s decision by a California Superior Court judge who said the proposition was “unenforceable.” It was a win for companies like Uber, which use gig drivers to transport passengers and deliver food, but don’t pay the costs an employer would have to pay. These costs may include drivers’ unemployment insurance, health insurance, and business expenses.

Still, the appeals court decision was not the final word. The Service Employees International Union, which, along with several drivers, filed a lawsuit challenging Proposition 22 in early 2021, is expected to appeal the ruling to the California Supreme Court, which would have several months to decide whether to hear the case.

The judges overturned Frank Roesch, the lower court judge whose decision to dismiss the proposal in August 2021 set the stage for a protracted and high-stakes legal battle that will determine the employment statuses of hundreds of thousands of California drivers.

Opponents of the proposition argued that the electoral measure was unconstitutional for several reasons. It placed limits on the State Legislature’s ability to oversee workers’ compensation for show drivers. It included a rule that restricted them to collective bargaining that, according to critics, was unrelated to the rest of the measure, and established a seven-eighths majority vote of the Legislature as an impediment to the approval of amendments to the measure related to collective bargaining – a requirement that was considered almost impossible to achieve.

The three appeals court judges, who heard oral arguments in the December case in San Francisco, disagreed on two of the three points, but agreed that requiring collective bargaining to take place through an amendment to the proposition “violates the principles of separation of interests.” powers” ​​and ordered that clause to be separated from the rest of the electoral measure.

“The proper remedy,” the justices wrote, is to cut that section and “allow the remainder of Proposition 22 to remain in effect, as voters indicated they desired.”

The coalition Protect App-Based Drivers and Services, an industry group, said the decision maintained the policy of protecting “the independent contractor status of app-based drivers in California, while providing drivers with new benefits.” Lyft and DoorDash also issued statements calling the decision a win-win for drivers and voters alike.

The Service Employees International Union condemned the decision.

“Every California voter should be concerned about the growing influence of corporations in our democracy and their ability to spend millions of dollars to deceive voters and buy laws,” David Huerta, president of SEIU California, said in a statement.

Jon Streeter, one of three judges on the appeals court, disagreed with much of the 63-page ruling by his colleagues, Tracie Brown and Stuart Pollak. In a 64-page dissent, Justice Streeter wrote that the entirety of Proposition 22 should be thrown out, in large part because of its clause limiting the legislature’s authority over workers’ compensation to concert drivers.

“I would confirm the judgment, but I prefer to go further. I believe we should invalidate Proposition 22 in its entirety,” Justice Streeter wrote. He added that the definition of independent contractors used in the measure was “constitutionally invalid”.

Uber and other companies have long argued that drivers value the flexibility of being an independent contractor with no hours set by an employer and say they would have to give up that freedom if they were hired. Labor activists respond that drivers are exploited, deserve better health care and work benefits, and could retain their flexibility under a traditional employment model.

Gig companies have spent more than $200 million pushing Proposition 22, which gave limited benefits to gig workers but exempted them from Assembly Bill 5, a law passed by the California Legislature in 2019 that set a new standard for determining whether gig workers shall be considered employees under the law.

If the AB 5, which is facing its own legal challenge, is applied to gig drivers, Uber and other companies could be improperly treating these drivers as independent contractors rather than employees.

As a result, concert companies would have to adjust their business models at the cost of several hundred million dollars a year, giving drivers more independence or – more likely – converting some of them into employees, possibly of a third-party vehicle. fleet operator that would use the Uber and Lyft platforms.

Uber used this model in parts of Europe and considered using it in California. Uber and Lyft said they would need to pause their California operations for a while as they switched to that model.

In a December blog post, Alison Stein, a senior economist at Uber, laid out a “forced reclassification” scenario that would be devastating for the company’s business. She wrote that drivers would have to work fixed shifts, service prices and wait times would increase, the company would reduce service in smaller cities, and only about a quarter of current drivers would be hired full-time as employees.

These arguments are misleading, said Veena Dubal, a professor at the University of California, San Francisco School of Law. She said drivers deserve to be treated like employees.

“Nothing about employment status restricts flexibility,” Dubal said, adding that raising prices is a “commercial decision, not a necessary consequence of the law.” She said that many drivers rarely worked for the platforms, so implying that the vast majority of drivers would have to find new work was misleading.

“The oligarchs are dancing in the streets tonight,” Dubal wrote on Twitter after Monday’s decision.

But the legal battle is far from over. Even though the California Supreme Court does not accept every case that is appealed to it, legal experts said they expected it to do so in this case.

“It’s very hard to imagine them dropping a case of this importance,” said Seth Harris, a professor of law and politics at Northeastern University who has studied the job situation of concert drivers.