In invalidating Prop 22, court overlooked basic constitutional law

On Aug. 20, a trial court in Alameda County invalidated Proposition 22 -- a statutory voter initiative that classified many app-based drivers as independent contractors -- citing three grounds. Castellanos v. State of Cal., RG21088725. This op-ed will discuss why the court's first ground -- a supposed conflict with the Legislature's plenary authority in the state constitution to create a system of workers' compensation -- appears to violate at least three basic rules of constitutional interpretation.

First, "one of the fundamental principles of our constitutional system of government is that a statute, once duly enacted, 'is presumed to be constitutional. Unconstitutionality must be clearly shown, and doubts will be resolved in favor of its validity.'" 7 Witkin, "Summary of Cal. Law," Const. Law, Section 58, pp. 102-03 (9th ed. 1088) (citing appellate decisions from the past 130 years). In the present case, instead of presuming the statute was constitutional, the trial court "went looking for trouble."

Almost all app-based drivers were classified as independent contractors under the previous common-law test (known as the Borello or right-to-control test). But in 2019, the California Legislature enacted Assembly Bill 5, which ostensibly classified such drivers as employees by codifying the California Supreme Court's "ABC" test from its 2018 Dynamex decision. AB 5 now includes a growing list of more than 43 exemptions from the ABC test for a diverse group of workers, including commercial fishermen, umpires, accountants, barbers, DJs and investment advisors. App-based drivers were not, however, exempted by the Legislature.

Proposition 22 did just that. It exempts such drivers from the ABC test, which has the effect of simply classifying them as independent contractors if certain criteria set forth in the measure are met. Bus. & Prof. Code Section 7451. But the trial court accepted the argument of the plaintiff unions that this somehow conflicts with Article XIV, Section 4 of the California Constitution, which provides in relevant part: "The Legislature is hereby expressly vested with plenary power, unlimited by any provision of this Constitution, to create, and enforce a complete system of workers' compensation."

The most obvious flaw in this reasoning is that nothing in Prop. 22 even remotely impinges on the Legislature's power to create and enforce a workers' compensation system. If a particular worker is classified as an independent contractor by a statute (e.g., AB 5 or Prop. 22), a corollary is that the worker is -- of course -- not covered by dozens of laws that apply to employees, including workers' compensation insurance. The trade-off is that independent contractors have schedule flexibility, are able to deduct business expenses from their taxes, and can make more money if they choose to work more. For the trial court to conflate statutory worker classification criteria with a limitation on the Legislature's constitutional power to create and enforce a system of workers' compensation seems like an obvious overreach.

Second, the trial court focused on the fact that the Legislature's power in Section 4 is "plenary," which the dictionary defines as "unqualified; absolute." (Oxford.) However, the California appellate courts have held --on more than one occasion -- that even plenary powers in the state constitution must yield if they conflict with an important statute. For example, the state constitution grants charter cities "plenary authority ... subject only to the restrictions of this article" over the manner and method of hiring, compensating and firing their employees. (Cal. Const., art. XI, § 5.) But the California Supreme Court held that the city council of a charter city had to "meet-and-confer" with a police union before it could even propose a charter amendment affecting how its employees were hired, compensated and fired. The Court cited the requirements of the Meyers-Milias-Brown Act -- a statute addressing a matter of statewide concern -- as compelling this result. People ex rel. Seal Beach Police Officers Assn. v. City of Seal Beach, 36 Cal. 3d 591 (1984).

Finally, the trial court suggested that the proponents of Prop. 22 could avoid the court's ruling by proposing the same provision as a constitutional amendment. But this ignores the very language of the constitutional provision cited by the court. Article XIV, Section 4 states in pertinent part: "The Legislature is expressly vested with plenary power, unlimited by any provision of this Constitution, to create, and enforce a complete system of workers' compensation." (Emphasis added.) Perhaps the court assumed that the proponents would amend Section 4 and classify app-based workers as independent contractors in the same constitutional amendment.

However, such an initiative would arguably violate the "single-subject rule," invalidating the entire measure, since criteria for classifying app-based workers as employees or independent contractors, and the Legislature's power to create a system of workers' compensation, do not appear to be germane to a single subject. Such an initiative would also be subject to attack in a lawsuit as an invalid constitutional revision. Amendments to the state constitution may be proposed by voter initiative petition, whereas a revision may be proposed only by the Legislature or a constitutional convention.

It will be interesting to watch this case as it moves through the appellate courts.