Business Law Journal

The passing of Prop 22 last November by voters resulted in certain app-based transportation and delivery companies being granted an exemption from the “ABC” classification test adopted in Assembly Bill 5 (“AB 5”).  AB 5 codified and extended the California Supreme Court’s landmark, unanimous decision in Dynamex Operations W., Inc. v. Superior Court (2018) 4 Cal.5th 903, establishing the “ABC” test, that is utilized in other jurisdictions in a variety of contexts to distinguish employees from independent contractors, as controlling law in California.

Among other things, the union-backed lawsuit challenged Prop 22 on the basis that the proposition was unconstitutional because it is in conflict with Article XIV of the California Constitution, which unequivocally states that the provisions for the creation of a complete system of worker’s compensation “are expressly declared to be the social public policy of this State, binding upon all departments of the state government.”  The lawsuit alleges that because Prop 22 purports to countermand or limit the Legislature’s otherwise “unlimited” constitutional authority to include app-based drivers in a complete system of worker’s compensation, Prop 22 is unconstitutional.  

On February 3, 2021, the Supreme Court denied the Petition without prejudice to refiling in an appropriate court, which means the challenge is not over. 

Take-Away for California Businesses 

This lawsuit is further confirmation that independent contractor classification issues, such as AB 5 and Prop 22, will continue to be at the forefront of employment related disputes in California in 2021 and likely for years to come.  Businesses that continue to utilize the services of independent contractors should revisit those classifications and consult with counsel regarding the impact of AB 5 and Prop 22. 

If you have questions about independent contractor classifications contact the authors or your usual trusted counsel at AALRR.

This AALRR post is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process. 

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