Opinion that Prop 22 is unconstitutional to be appealed

Attorneys for ride-hailing companies said Monday that an Alameda County judge got it wrong when he ruled Proposition 22 -- which prevents gig drivers workers from being considered employees -- is unconstitutional.

If upheld, Superior Court Judge Frank Roesch's Friday afternoon ruling would toss out the initiative -- backed by Uber Technologies Inc., Lyft Inc., and DoorDash Inc. in a big-money campaign that passed in November 2020 with 58% of the vote.

Roesch ruled that the proposition, because it is not a constitutional amendment, does not survive scrutiny because it limits the state Legislature's power to decide the drivers must be covered by the workers' compensation system. Castellanos v. State of California, RG21088725 (Alameda County Sup. Ct, filed Feb. 11, 2021).

"Proposition 22's Section 7451 is therefore an unconstitutional continuing limitation on the Legislature's power to exercise its plenary power to determine what workers must be covered or not covered by the workers' compensation system," the judge wrote.

The upcoming appeal may turn on how appellate courts interpret a 2006 state Supreme Court decision that permitted an initiative that would have given additional powers to the California Public Utilities Commission to remain on the ballot.

Proposition 80 failed in a special election a year earlier, but the state high court subsequently ruled the California Constitution's references to the authority of the Legislature must be read to "include the people's right to legislate through the initiative power." Independent Energy Producers Association v. McPherson, 38 Cal. 4th 1020 (S Ct, filed June 19, 2006).

Kurt R. Oneto, an attorney with Nielsen Merksamer LLP who represents the ride-hailing companies, said McPherson declares that voters have the ultimate authority over legislative powers even in the case of the workers' compensation system.

"The trial court judge [in the Proposition 22 case] has refused to acknowledge that the voters have coequal authority as the Legislature," Oneto said in a telephone interview Monday.

Roesch distinguished the cases, writing that Proposition 80 would have expanded the powers of the Public Utilities Commission while Proposition 22 limits the ability of the Legislature to make changes in the workers' compensation system.

The judge also ruled that the initiative violates the single-subject rule by including a ban on collective bargaining that does not promote any of the ostensible goals of Proposition 22.

"It appears only to protect the economic interests of the network companies in having a divided, un-unionized workforce, which is not a stated goal of the legislation," the judge wrote.

Scott A. Kronland, an attorney with Altshuler Berzon LLP who represents the plaintiffs, defended Roesch's ruling.

"There were several ways in which the drafters of the initiative overreached and included provisions that conflict with the state Constitution," he said Monday during a Zoom conference call.

William B. Gould IV, an emeritus professor at Stanford Law School and co-author of a brief that supported the plaintiffs, said workers' compensation language is a fatal flaw of the initiative because it is under the authority of the Legislature.

"The initiative wipes out workers' compensation for these workers," he said in a phone call.

Workers' compensation only covers employees, not independent contractors, Gould added.

Uber, Lyft and the business association said they will appeal Roesch's ruling once final judgment is entered, probably later this week. That action will stay the judge's ruling until it is considered by the 1st District Court of Appeal, Oneto said.