The battle over Prop 22: A sign of things to come

Virtually every ballot initiative that has come before the California voter has been a response to the action - or perceived inaction - of the State Legislature. When a ballot initiative passes, the voters who participate in that particular election effectively supplant the State's legislators. This was, of course, the intended outcome when Proposition 7 was passed in 1911, establishing this now-familiar form of direct democracy. But as the 1st District Court of the Appeal has shown in Castellanos v. State of Cal., ___ Cal. Rptr. 3d ___ (Cal. Ct. App. 2023), after more than a century, the question of what a ballot initiative can, and cannot do remains unsettled and places the courts in an uncomfortable position of balancing the powers of the electorate with the powers of the Legislature.

At first glance, the foundational facts of Castellanos follow the familiar path laid by many other ballot initiatives. In 2019, the State Legislature enacted Assembly Bill 5 (2019-2020 Reg. Sess.), which heightened the standards a hiring entity had to meet to appropriately classify workers that provide services to that entity as independent contractors. Assembly Bill 5 and its progeny exempted a myriad of disparate professions, but one group of workers were not included: app-based drivers. The result of this exclusion was Proposition 22, which was passed via ballot initiative in the 2020 election. Proposition 22, however, was more than just a voter-driven rebuke of the Legislature's refusal to include app-based drivers in the group of workers exempted from Assembly Bill 5.

Proposition 22 had three unique features that the plaintiffs in Castellanos labeled unconstitutional: (1) it effectively created a parallel workers' compensation system specific to app-based drivers (since an exemption from Assembly Bill 5 would otherwise exclude them from the State workers' compensation scheme); (2) it identified what types of statutes by the State Legislature would constitute amendments to it; and (3) it identified legislative acts that did not directly amend its provisions but that would nonetheless be considered amendments thereto.

On the one hand, the court upheld Proposition 22's creation of a separate workers' compensation system for App-based drivers

The parallel workers' compensation system was challenged by the plaintiffs on the grounds that article XIV, section 4 of the California Constitution afforded the State Legislature "plenary power, unlimited by any provision of this Constitution, to create, and enforce a complete system of workers' compensation. ..." According to the plaintiffs, the Constitution's reference to "plenary power" meant that Proposition 22 could not restrict the Legislature's ability to modify (or eliminate) the parallel workers' compensation system put into place by Proposition 22. The Court, in a split decision, disagreed. The justices in the majority opined that the Legislature's "plenary power" did not equate to exclusive power, and thus the parallel workers' compensation system created by Proposition 22 could coexist with the legislatively-created workers' compensation system. In so holding, the justices on the majority relied upon Indep. Energy Producers Assn. v. McPherson, 38 Cal. 4th 1020 (2006), in which the California Supreme Court held that a similarly-worded constitutional provision granting "plenary power" to the Legislature to confer authority and jurisdiction to the Public Utilities Commission did not preclude ballot initiatives from conferring additional authority to the Commission.

The dissenting justice in Castellanos sought to distinguish McPherson by arguing that because the Constitution expressly empowered the Legislature to develop a "complete system of workers' compensation," a ballot initiative that did not amend the Constitution cannot be used to overrule the Legislature's constitutional power to govern the workers' compensation system. In making this argument, the dissenting justice did not focus on the Constitution's reference to a "complete system" to argue that the Legislature has exclusive authority over the entire workers' compensation ecosystem, but instead primarily relied on policy arguments to frame Proposition 22 as providing a parallel system that "falls far short" of the protections afforded by the legislatively-created workers' compensation system. The most interesting theory posited by the dissenting justice, however, pertained to when ballot voters act as the "people acting in their sovereign capacity." In the dissenting justice's view, ballot voters do not act in their sovereign capacity when they legislate through the ballot initiative process; they can only act in that role when they approve constitutional amendments. As such, since Proposition 22 enacted statutory amendments concerning a subject area which was granted to the Legislature under the State Constitution, Proposition 22 must yield to the Legislature's constitutional authority. Notwithstanding the potentially momentous implications of this view, the majority opinion did not directly address it, which leaves the question open for future debate.

On the other hand, the court did not let Proposition 22 displace the Legislature altogether

The Legislature has "limited ability" to amend ballot initiatives that become law without obtaining subsequent voter approval, unless the ballot initiative itself permits such an amendment. People v. Superior Court (Pearson), 48 Cal. 4th 564, 568 (2010). In a creative twist, the drafters of Proposition 22 attempted to test the limits of this rule by defining which legislative acts constitute an amendment. Specifically, one section of the initiative declared that legislation authorizing unions to represent the interests of app-based drivers would be considered an amendment (and therefore impermissible).

The entire court in Castellanos struck this provision as violative of the Separation of Powers doctrine, holding that because Proposition 22 did not directly address the issue of collective bargaining, a provision effectively limiting the Legislature's ability to regulate collective bargaining for app-based drivers intrudes on the Legislature's constitutional authority to legislate a "related but distinct area" of the law. Thus, while the Castellanos court was willing to afford ballot voters equal footing with the State Legislature, it was not willing to permit ballot initiatives to have extended reach beyond the bounds of the specific issues to which the initiatives were drafted to address.

The court's rejection on Proposition 22's limitations on judicial power has wide reach

Proposition 22's feature of defining which legislative acts constitute an amendment had a second consequence: it was challenged as impinging on the judiciary's role as the final arbiter on statutory interpretation.

Article II, section 10(c) of the State Constitution outlines the parameters by which a ballot initiative may be amended. All three justices in Castellanos interpreted this provision as precluding a ballot initiative from occupying the role of statutory interpretation, and thus Proposition 22 could not define which legislative acts constitute an amendment. Castellanos is a reminder that judicial deference to ballot initiatives stops the moment an initiative interferes with the judiciary's role in interpreting laws.

What does the future hold?

The push-and-pull between ballot initiatives, the courts, and the State Legislature was evident in Castellanos, and Castellanos will not be the last word on the power and limit of direct democracy in California. It is likely that going forward, referendum drafters will look to see which creative avenues can be taken to expand the reach of ballot initiatives, while the State Legislature moves to preserve its power.