On July 25, 2024, the California Supreme Court issued an opinion upholding the statewide ballot measure that classifies app-based drivers as independent contractors. Voters passed the law (also known as Proposition 22) in November 2020, funded in large part by app-based rise services. The law exempts app-based drivers from the otherwise-required “ABC” test to determine if a worker is an independent contractor or an employee.

What is the law that was challenged?

In November 2020, California voters passed Proposition 22 (California Business & Professions Code § 7448 et seq.), which made app-based drivers independent contractors — rather than employees — if:

1. The network company does not unilaterally prescribe specific dates, times of day, or a minimum number of hours during which the app-based driver must be logged into the network company’s online-enabled application or platform.
2. The network company does not require the app-based driver to accept any specific rideshare service or delivery service request as a condition of maintaining access to the network company’s online-enabled application or platform.
3. The network company does not restrict the app-based driver from performing rideshare services or delivery services through other network companies, except during engaged time.
4. The network company does not restrict the app-based driver from working in any other lawful occupation or business.

Under Proposition 22, the app-based drivers and the company (the “network company”) must also have a written contract, provide the drivers a guaranteed minimum level of compensation, provide a quarterly health care subsidy to qualifying drivers, and maintain occupational accident insurance that covers medical expenses and lost income for injuries suffered while the driver is online for the company.

Proposition 22 sets a particular procedure for amending the law, requiring the legislature pass amendments with seven-eighths of the membership, and limits amendments to those that are consistent with and further the purpose of the law.

What was challenged, and what did the court do?

Drivers challenged Proposition 22 as unconstitutional under the California constitution, arguing that it limited the legislature’s unlimited plenary power with respect to requiring workers’ compensation insurance.

In its recent opinion, the California Supreme Court upheld the constitutionality of the law. The Court noted that the initiative process was establish “not as a right granted the people, but as a power reserved by them.” Accordingly, the power reserved for the legislature regarding workers’ compensation is not exclusive such that it would preclude the electorate from undoing legislative action. Moreover, the Court noted that the language of Proposition 22 does not limit the legislature’s power to enact workers’ compensation laws (and does not itself say anything about workers’ compensation).

Further, the Court noted that the policy language of the California Constitution does not have a requirement that the workers’ compensation system cover any particular group of workers.

The Court did not make any ruling about whether any action by the legislature providing workers’ compensation to app-based drivers would run afoul of the provisions of Proposition 22.

What does this mean going forward?

This decision does not change any law (it just upholds a law already in place), and California app-based drivers may (subject to the above-described requirements) continue to be classified as independent contractors. However, the opinion sets the stage for potential future litigation regarding workers’ compensation requirements for app-based drivers in California.