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: Uber and Lyft’s fight with California takes on bigger question of voters’ sway


What happens next in the saga of Proposition 22, the California voter-approved law that would allow gig companies to continue treating drivers as independent contractors instead of employees, is in the hands of an appeals court, and the results could have larger implications than just what’s in store for these plaintiffs.

Prop. 22 was a ballot initiative approved by 58% of California voters in 2020, but the Service Employees International Union and four ride-hailing drivers filed suit to challenge the law, and a judge ruled Prop. 22 unconstitutional last summer. A coalition that includes gig companies Uber Technologies Inc.
DoorDash Inc.
Lyft Inc.

and Instacart is appealing that ruling.

A three-judge panel at the California First District Court of Appeal in San Francisco on Tuesday heard oral arguments and peppered both sides with plenty of questions, including about whether voters — through initiatives such as Prop. 22 — and the state legislature have equal power to make laws in California. California Superior Court Judge Frank Roesch, who ruled last year that Prop. 22 was unconstitutional, cited as a reason the fact that the state constitution gives the legislature “plenary,” or absolute, power over workers’ compensation.

The office of California Attorney General Rob Bonta, who opposed Prop. 22 when he was a state lawmaker and joined a coalition of 17 state attorneys general in filing a comment letter in support of the U.S. Department of Labor proposal to strengthen federal protection against worker misclassification Tuesday, must defend the law in the appeal of that ruling. Attorney Jeffrey Fisher argued for the gig companies that California voters “have had initiative power for over a century,” and that “the people’s power” is equal to the legislature’s.

Jose Zelidon-Zepeda, deputy attorney general, also said it would be “unprecedented” to strike down the proposition, and that citizen and legislative power “exists side by side.”

Judge Jon Streeter interjected: “We’ve got brief after brief talking about the significance of this. To remove a vast number of workers from the workers-comp system would dismantle what the legislature is charged with providing” under the state constitution.

Scott Kronland argued for the union-backed gig workers that a provision in Prop. 22 also violates the rule that says initiatives must address a single subject. Prop. 22 inserted a prohibition against gig workers being allowed to have collective-bargaining power.

“This is an initiative that tells us what it’s about,” he said. “It’s about independent-contractor status. There’s nothing about why drivers can’t have a union. That’s hidden in the amendments [section].” He said allowing that to stand could set a precedent and render the single-subject rule toothless.

Judge Tracie Brown said since the collective-bargaining issue was mentioned in the amendments, “it undermines the theory that voters had no idea. It’s not like [the initiative was] 1,000 pages.”

The presiding judge, Stuart Pollak, ended the proceedings by saying “the court certainly understands the significance of the case.”

The court now has 90 days to make a decision.

In-depth: There is no legal definition of gig work, but that could change

Stacey Leyton, an attorney for the union-backed gig workers, told MarketWatch on Tuesday that she was “encouraged by the proceedings.” She acknowledged that the judges asked a lot of questions during the hearing, which stretched on about half an hour longer than was scheduled.

“It’s an important case,” she said. “They’re well-respected judges. I’m not surprised.” If the other side prevails, she said she would expect that “we would pursue all our rights.”

Kurt Oneto, an attorney for the gig companies’ coalition, said during a news briefing Monday that if the gig companies lose, they would appeal and that he “would be surprised if the California Supreme Court did not take the case.”

A Lyft spokeswoman said Tuesday that “California’s initiative process, which was established over 100 years ago, is one of the most precious rights of our democratic process.” An Uber spokesman pointed to recent company blog posts, including one that warns about higher ride prices, fewer drivers and “set shifts and lost flexibility” if Prop. 22 were to be invalidated.

For more: Senators ask SEC to require disclosure of gig workers and other contractors

The Protect App-Based Drivers and Services Coalition, which is backed by those two companies plus DoorDash and Instacart, said in a statement: “Challenges to the law are grounded in political antics, are undemocratic and are driven by special interests who are actively trying to undermine the will of voters and app-based drivers.”

Ahead of opening arguments Tuesday morning, dozens of app-based ride-hailing drivers and delivery workers gathered on the front steps of the San Francisco courthouse. Joined by fast-food workers and other union supporters, they called on the court to uphold the ruling invalidating Prop. 22.

“The world has started to open its eyes to what the gig economy is all about,” said Hector Castellanos, one of the four gig-worker plaintiffs in the lawsuit seeking to throw out Prop. 22. He told the crowd that “the companies like to say this is a side job. But for so many of us this is a full-time job.”

The Value Gap: Unions must reckon with racial inequality and speak to ‘a more marginalized workforce,’ former U.S. labor board chair says

Castellanos, who is from Antioch, Calif., later told MarketWatch that he drives all over the Bay Area for both Uber and Lyft. He said he works 12-hour days, from 5 a.m. to 5 p.m., but gets no benefits.

The case is Castellanos et al v. State of California et al.

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