After court ruling, California’s gig worker battle takes new turn

The seemingly perpetual political and legal battle over whether gig workers for Uber, Lyft, Doordash and services are contractors or employees took another turn last week and may go full circle – back to the state Supreme Court and possibly a second trip through the Legislature.

A state appellate court upheld all but one section of Proposition 22, a 2020 ballot measure sponsored by Uber and other companies to exempt its drivers from Assembly Bill 5, a 2019 law that declared which categories of workers could be contractors and which must be payroll employees.

The legislation was sought by labor unions to implement a 2018 state Supreme Court ruling that stemmed from a 2004 decision by Dynamex Operations West, a package delivery service, to convert its drivers from employees to contractors.

Two drivers sued, contending that the conversion violated state labor law. After preliminary skirmishing in lower courts, the issue wound up in the California Supreme Court. It declared that Dynamex’s drivers were improperly converted to contractors and established a three-factor test to determine whether a worker in any industry must be a payroll employee or could be a contractor.

It was a huge win for California’s labor unions, which view contractor status as a way for employers to avoid union organization of their workers or provide benefits such as health insurance and workers’ compensation. Unions quickly urged the Legislature to codify the ruling and narrowly specify categories of workers that could be contractors.

Lorena Gonzalez, a labor leader and former Democratic assemblymember, carried AB 5, which provided only a few exemptions from employee status, such as hairdressers and real estate agents. She now heads the California Labor Federation.

After Gov. Gavin Newsom signed AB 5, the affected companies launched an initiative to exempt their drivers and pledged tens of millions of dollars to qualify and pass it. Ultimately they spent more than $200 million on Proposition 22, contending that their contractor systems provided drivers with flexibility and they would receive some employee-like protections and benefits.

The labor movement, oddly, did not mount an equally strong campaign against the measure, spending less than $20 million, and voters approved it by a 3-2 margin. Its approval, however, merely shifted the issue back to the courts in a lawsuit that challenged Proposition 22’s constitutionality.

An Alameda County judge invalidated the measure but last week a three-member appellate court panel voted 2-1 to uphold all but one piece, which probably will mean a trip back to the state Supreme Court and possibly the Legislature.

If the Supreme Court agrees with the appellate ruling, the transportation services could continue classifying their drivers as contractors. However, the one section of Proposition 22 tossed out by the appellate judges, which was aimed at making it almost impossible for the Legislature to amend its provisions, would open the door to another legislative clash. It would allow the Legislature to decree that contract drivers could, if they wish, form unions to bargain with the companies.

It’s dead certain that unions will seek such legislation if the Supreme Court ratifies the appellate court ruling.

“We are grateful that the California Court of Appeal has affirmed that companies like Uber, Lyft, Doordash and Instacart can’t keep drivers from joining together in a union through their deceptive ballot measure,” Mike Robinson, a contract driver who is one of the plaintiffs in the suit, said in a statement.

And if the Legislature acts, what then? Would there be another ballot measure to overturn that law as well? Given the issue’s 19-year history, one cannot discount that possibility.