On March 13, the California Court of Appeal mostly upheld Proposition 22, which authorized rideshare and delivery network platforms, such as Uber and Postmates, to classify their workers as independent contractors instead of employees.
On March 17, the U.S. Court of Appeals for the 9th Circuit ruled that these platforms should be given the opportunity to prove they were unconstitutionally excluded from exemptions to California’s independent contractor statute, commonly called Assembly Bill 5.
On March 24, the California Court of Appeal ruled that an Uber driver who claimed he had been misclassified as an independent contractor had to arbitrate his individual Private Attorneys General Act (PAGA) claim against the company, but also that he did not thereby lose the right to represent other “aggrieved employees” in court following his arbitration.
Prop. 22 mostly upheld
Proposition 22 created a new kind of independent contractor under California law, the app-based driver. It gives drivers some of the rights of employees, such as minimum hourly pay and the right to reimbursement of some expenses. The Service Employees International Union and others challenged the law. In August 2021, a state trial court invalidated Prop. 22.
In Castellanos v. State of California, a split three-justice of the California Court of Appeal mostly reversed the trial court’s order. The two-justice majority rejected the claim that Prop. 22 interferes with the Legislature’s authority over California’s workers compensation system. The court held that the state constitution gave both the Legislature and the voters, through the initiative process, authority to revise workers compensation laws.
The Court of Appeal, however, also unanimously struck from Prop. 22 a provision that would allow app-based drivers to engage in collective bargaining only if the Legislature amends Prop. 22 to authorize such bargaining by a 7/8 vote. That provision, said the court, unconstitutionally restricts the Legislature’s power over a subject Prop. 22 did not directly address and unconstitutionally restricts the power of courts to say just what an amendment to Prop 22. is.
AB 5 may have unconstitutionally excluded app-based gig companies from its exemptions
AB 5 codified the ABC test that bars companies from classifying workers as independent contractors unless the hiring entity can prove the worker: (A) works relatively free of the hiring entity’s control; (B) performs work beyond the “usual course of the hiring entity’s business” (usually the toughest part of the test); and (C) is engaged in an independent trade, occupation, or business similar to the work performed. The California Legislature exempted many kinds of enterprises from this strict test and generally allowed them to classify workers as independent contractors if they could satisfy a more flexible test.
The 9th Circuit ordered the trial court to allow the app-based rideshare and delivery network platforms to demonstrate that the Legislature excluded them from those industries exempt from the ABC test due to animus instead of reason in violation of the platforms’ constitutional right to equal protection under the law.
The court observed that economic legislation es constitutional muster if there is any reasonably conceivable rational basis for it. The court concluded that, even under this “fairly forgiving” standard, the companies plausibly alleged “that the primary impetus for the enactment of AB 5 was the disfavor with which the architect of the legislation” then-Assembly member Lorena Gonzalez, “viewed Uber, Postmates, and similar gig-based business models.”
The court said the “piecemeal fashion in which the exemptions were granted” suggests the exemptions resulted from “backroom dealing” rather than from an effort to protect worker rights. The court also pointed to the repeated disparaging comments Gonzalez made about the platforms.
Uber driver must arbitrate individual misclassification claim, but may have right to represent other “aggrieved employees” in court once arbitration is over
On March 24, the California Court of Appeal ruled that Uber could require driver Johnathon Gregg to honor his contractual agreement to arbitrate the PAGA claim he brought against the company for wage and hour violations resulting from the company misclassifying him as an independent contractor.
But, as have several other California courts of appeal in recent rulings addressed in this space, the court ruled Gregg still may be able to assert claims for other “aggrieved” misclassified drivers in court once his arbitration concludes. The court rejected the U.S. Supreme Court’s recent interpretation of PAGA that mandatory arbitration of Gregg’s individual PAGA claims required dismissal of PAGA claims he was asserting on behalf of others.
The law governing app-based driver platforms remains very much in motion.
Dan Eaton is a partner with the San Diego law firm of Seltzer Caplan McMahon Vitek where his practice focuses on defending and advising employers. He also is an instructor at the San Diego State University Fowler College of Business where he teaches classes in business ethics and employment law. He may be reached at [email protected]. His Twitter handle is @DanEatonlaw
