Senior Vice President, Employment Policy Division, U.S. Chamber of Commerce
March 15, 2023
On March 13, the First Appellate District for the California Court of Appeal upheld the legality of Proposition 22. The upshot is that independent contractors earning money from companies like Uber, Lyft, Instacart, DoorDash, and others can continue doing so as independent workers. This is good news for those workers, for consumers, and the businesses in the gig economy.
As background, in 2019, the California legislature passed a bill known as AB-5. The law imposed a new state test for determining independent contractor (IC) status known as the ABC test, so called because it includes three specific factors (A, B, and C), and a worker must meet each of those factors to be considered an IC. Otherwise, a worker is considered a formal employee. Under AB-5, many ICs would suddenly become employees, losing the flexible work conditions to which they had become accustomed.
Gig economy companies launched a ballot initiative, Prop 22, which created an exemption from AB-5 for businesses that agreed to provide specific benefits. In November 2020, Prop 22 passed with a large margin of 58-41.
Unions had been among the strongest advocates of AB-5 (in fact, the lead sponsor of the bill later quit the legislature to work for the California Labor Federation). This is hardly surprising, since independent contractors are not covered by the National Labor Relations Act. So, as one might expect, the unions launched litigation seeking to overturn Prop 22, and in August 2021, a judge did just that.
The supporters of Prop 22 appealed, and that led us to the March 13 decision by the Court of Appeal. In its decision, the Court found that “Proposition 22 does not intrude on the Legislature’s workers’ compensation authority or violate the single subject rule[.]” In this regard, the Court of Appeal rejected the lower court’s decision. Put simply, this means that workers using apps to work independently can continue to do so as ICs.
However, the Court of Appeal also found that Prop 22 improperly limited state lawmakers’ ability to enact amendments, in particular relating to whether gig workers could unionize. What this might portend remains to be seen. Moreover, unions are likely to petition the state Supreme Court to hear their case.
But the bottom line is that Prop 22 remains state law, and individuals who choose to work independently using various apps can continue to do so. That is cause for celebration indeed.
About the authors
Spencer oversees the Chamber’s work on immigration, retirement security, traditional labor relations, human trafficking, wage hour and worker safety issues, EEOC matters, and state labor and employment law.