The legal wars about the gig economy continue.
On March 13, the California Court of Appeal 1st District rendered its decision in Hector Castellanos v. State of California, an appeal from an Alameda County Superior Court decision which had ruled that Prop 22 (the “Protect App-based Drivers and Services Act”, i.e. Business & Professions Code Sections 7448-7467) was unconstitutional.
I’ve included a pdf of the lengthy Court of Appeal decision at the bottom of this post.
The Court of Appeal two justice majority ruled in its 63 page opinion that that Prop 22 does not unconstitutionally intrude on the Legislature’s workers’ compensation authority. Moreover, the Court of Appeal majority concludes that Prop 22 does not violate the “single subject rule” for initiatives.
Justice Jon Streeter filed a 64 page dissent, arguing that Prop 22 does violate the California Constitution.
While the case will undoubtedly be appealed to the California Supreme Court (which may or may not the gig economy companies are likely celebrating at the moment, at least on those points.
However, it was only a partial victory. Why? The Court of Appeal held that sections 7465(c)(3) and (c)(4) of the act are invalid on separation of powers grounds because they intrude on the judiciary’s authority to determine what constitutes an amendment to Proposition 22. As a result, they ordered that section 7465(c)(3) and (4) be severed and allowed the rest of Prop 22 to remain in effect.
The court noted that B&P Section 7465(c)(3) declared than any statute that places unequal regulatory burdens on app-based drivers, such as a rule that prohibits only app-based drivers from performing particular services, constitutes an amendment of the initiative. It appears that under Castellanos, this section is severed out and would no longer be operative.
And the court notes that B&P Section 7465(c)(4) declares that a statute constitutes an amendment if it authorizes collective bargaining on behalf of the drivers. Again, this section, which appears to define what constitutes an amendment, is now severed out.
If the California Supreme Court declines review or adopts the reasoning of the Court of Appeal, in the future we’ll probably see further legal struggles over legislative tweaks to Prop 22 and whether any future tweaks constitute prohibited amendments. Prop 22 does not appear to be going away, but Castellanos does appear to leave a crack in the door for those who would seek to make an argument that tweaks are not impermissible.
A quick look at the pages of names who filed Amicus Curiae briefs reveals many of the top lawyers and law professors in California making arguments on behalf of parties on both sides of this matter.
Here is a link to the Court of Appeals decision:
https://www.courts.ca.gov/opinions/documents/A163655.PDF
And here is a pdf of the Court of Appeals decision:
Prop22CastellanosOpinion(1stDCA)(3.13.23)
Stay tuned.
Julius Young
510.835.8870