California’s gig worker fight is back in the courts

The high-stakes conflict over whether those who drive for Uber, Lyft and other delivery and rideshare companies are employees or independent contractors entered a new phase last week in an Alameda County courtroom.

Judge Frank Roesch declared that Proposition 22, a 2020 ballot measure sponsored by Uber, etal, to overturn a state Supreme Court decision and a state law, is unconstitutional.

The measure exempted the companies’ drivers from being classified as employees but Roesch said that it violates the state constitution by interfering with the Legislature’s ability to make the drivers eligible for worker’s compensation benefits. Thus, he said, “the entirety of Proposition 22 is unenforceable.”

His ruling is, of course, not the last word on the long-running conflict that has pitted Uber and other “gig work” companies against unions in judicial and political arenas. The case will almost certainly climb the judicial ladder to the state Supreme Court, but the companies will face a tough audience since they would be, in effect, asking the court to overturn itself.

Three years ago, the Supreme Court unanimously imposed a three-way test to determine whether a worker is a payroll employee or can be classified as an independent contractor, making it much more difficult for the contractor designation to be applied.

The Dynamex case, so named for a San Diego package delivery company that had converted its drivers from employees to contractors, was a huge win for labor unions because it meant more payroll workers could, in theory, become union members.

While California’s union membership is fairly high at 16.2% of the state’s 15 million workers, fewer than half are in the private sector. Just 15% of the state’s workers are government employees but they account for more than half of union membership.

As the state’s economy evolved into services, technology and logistics, private sector union membership shrank and an increase in non-employee gig work, such as driving for Uber and Lyft, accelerated the trend.

Unions considered it “misclassification” that denied fringe benefits to gig workers and pushed the issue into the Supreme Court with the Dynamex case. After winning in court, they shifted their battle to the Capitol by sponsoring Assembly Bill 5, a 2019 measure that placed the Dynamex ruling’s three-way test into law with a few selective exemptions such as cosmetologists and real estate agents.

As soon as Gov. Gavin Newsom signed the legislation, the transportation companies launched the initiative campaign to carve out an exemption for their drivers, resulting in Proposition 22’s appearance on the 2020 ballot.

The companies spent $200-plus million on a saturation campaign to enact the measure, more than 10 times what unions and their allies spent to oppose it, and it passed by a nearly 2-to-1 margin.

Its passage was remarkable not only for how much money was spent to persuade voters, but that it passed so handily in an overwhelmingly Democratic state despite being denounced by virtually every Democratic political figure.

Defeated at the polls, the unions returned to the judicial system and chose Alameda County, one of California’s most Democrat- and union-friendly areas, as its venue. They also very cleverly avoided a direct confrontation on the gig worker issue by arguing that Proposition 22 undermines the workers’ compensation system, and Judge Roesch agreed.

The ultimate outcome will have impacts far beyond the drivers for Uber, Lyft and other gig work companies. The issue is percolating in other states and in the federal government and Proposition 22’s fate will either encourage or discourage other industries from seeking similar exemptions.