After the Prop. 22 ruling, what's next for Uber and Lyft?

People in green shirts hold up protest signs.

Aug. 25, 2021 1:01 PM PT

The move by a California judge to invalidate Proposition 22 was a bold rebuff of an aggressive effort by companies such as Uber and Lyft to rewrite the rules of gig work. But it’s unlikely to change how the companies treat their drivers while the ruling snakes through courts, and experts disagree on the likely final outcome.

Alameda County Superior Court Judge Frank Roesch on Friday called the voter-approved law, which allows gig companies to classify their workers as independent contractors rather than as employees, unconstitutional and unenforceable. Experts called the ruling an unexpected move, given California judges are usually reluctant to strike down ballot measures and risk being seen as thwarting the will of the voters.

“I am surprised,” said David McCuan, a political science professor at Sonoma State University who studies California ballot measure campaigns. “We haven’t seen judges go there. They don’t like to think of themselves as political animals.”

Dan Seeman, a political consultant and former public safety advisor to Gov. Gavin Newsom, called it “a seismic decision,” given the political muscle and funds backing Proposition 22, which became the most expensive ballot measure in California history.

Uber and other gig economy companies backing the law said they will appeal the ruling immediately. The companies spent more than $200 million last year bankrolling the ballot initiative campaign in order to secure an exemption from state law AB 5, which required them to classify drivers as employees — and pay for the host of benefits and protections that come with that status, such as minimum wage and workers’ compensation in case of injury.

Proposition 22 won with 58% of the vote. Since it went into effect, some drivers have said the little benefits that companies offered them to lure support for the law are difficult to access, and overall, their working conditions have deteriorated as the companies introduced changes, including restricting information available to drivers.

With the new ruling, where the law goes from here is unclear.

The coalition representing Uber, Lyft, DoorDash, Instacart and other companies backing Proposition 22, called Protect App-Based Drivers and Services, is expected to soon appeal the ruling. California’s attorney general can also file an appeal to overturn Roesch’s decision.

Once an appeal is filed, a state appellate court will take up the case, and gig companies plan to ask for a stay of Roesch’s ruling while it’s appealed. That means the provisions of Proposition 22 will probably remain in effect — and drivers and customers can expect business as usual — through the appeals process, which could stretch longer than a year.

Courts tend to expedite high-profile cases such as this one, but even then, the first appeal could take several months, law experts said. The case is expected to make its way to the California Supreme Court, which would be the final arbiter.

Even if the Supreme Court invalidates Proposition 22, that doesn’t convert drivers to employees right away, said Kurt Oneto, an attorney representing the gig company coalition. “That’s one misconception. None of the prior laws automatically makes one an employee or a contractor,” Oneto said.

An ongoing lawsuit filed by the California attorney general’s office and three city attorneys in 2020 against Uber and Lyft might be one avenue to retest employee classification in the courts. If Proposition 22 is thrown out, the argument gains new wind.

Although other ballot initiative challenges have gone all the way up to federal courts, experts said this one won’t because the lawsuit dealt exclusively with alleged violations of the state Constitution.

It’s common for groups that oppose ballot initiatives, and lose, to challenge ballot measures in court — periodically with positive results. Of the 65 ballot measures approved in California from 1964 to 2007, 20 — or about 31% — have been partially or entirely invalidated after being adjudicated through the courts, according to the Center for Governmental Studies.

Some experts said Roesch’s challenge to the law is not a clear-cut case, even if his argument that it violates the California Constitution has grounding.

The ruling found the law unduly encroaches on the state Constitution by restricting the Legislature’s ability to regulate workers’ compensation rules — which it does not have the authority to do, since Proposition 22 was introduced through the ballot measure process as a statutory initiative, rather than as a constitutional amendment.

The ruling also argues that Proposition 22 violates a constitutional provision requiring initiatives to be limited to a “single subject.” Roesch wrote that although the law claims to protect gig workers, it also “obliquely and indirectly” prevents them from bargaining collectively.

Kenneth P. Miller, a professor of state and local government at Claremont McKenna College, said Roesch’s challenge relies on a process-oriented, technical argument that historically hasn’t worked as often in California as in other states with initiative processes. In other words, said McCuan of Sonoma State, the ruling rests on “the process of direct democracy, and less on the substance of what Proposition 22 tries to do.”

Colorado’s and Florida’s legislatures have been more stringent with enforcing the single subject rule than California, Miller said. He added that some scholars see “single subject” as an impossible rule because one could argue that any two items in a ballot measure are too different to be about the same subject.

Veena Dubal, a UC Hastings College of the Law professor and longtime critic of the ride-hailing companies, thinks ultimately the courts will uphold Roesch’s ruling. “This decision shows that Prop. 22 was so overly comprehensive,” she said. “California’s Constitution does not permit an initiative like this to so completely take away the rights of the workforce.”

Robert Stern, a former general counsel of the Fair Political Practices Commission who has studied California ballot initiatives extensively, said this challenge was a “long shot” and believes the Supreme Court is likely to overturn the decision. Stern was coauthor of the state’s landmark 1974 Political Reform Act, a ballot initiative that was also struck down, though ultimately upheld by the state Supreme Court.

“I’m a stronger proponent of the power of an initiative than this court ... but people disagree,” he said.

In the meantime, the ruling has reignited the battle over the future of work in California, giving a morale boost to the union, driver groups and other labor advocates trying to secure more comprehensive protections for workers.

In February, the state Supreme Court declined to hear a lawsuit filed by a small group of app-based drivers and the Service Employees International Union over Proposition 22. The decision represented a setback for labor advocates. Still, the plaintiffs plowed forward with the challenge, refiling their petition in a lower court, which led to Roesch’s ruling.

“Now I feel like I can breathe a little easier,” said Hector Castellanos, one of the drivers who brought the lawsuit, at a video news conference Monday. Castellanos has driven for Uber and Lyft for about five years.

“We are planning to fight,” Alma Hernández, executive director of SEIU California, said at the same news conference.