A boost for gig economy companies, the California Court of Appeal in Castellanos v. State (2023) recently upheld Proposition 22, a ballot initiative which maintained the independent contractor status of ride-share drivers. However, the case's potential appeal to the California Supreme Court leaves future classifications of ride-share drivers uncertain.
Over the past decade, ride-sharing services like Uber and Lyft have dramatically increased in popularity, offering gig economy workers new avenues to explore. This rise in ride-sharing, however, has sparked a debate about whether drivers should be classified as employees or independent contractors..
To resolve this debate, California passed Assembly Bill No. 5 (AB5) in 2019, which sought to classify workers as employees if they met certain criteria, such as being under the control of the hiring entity. Under AB5, many drivers were reclassified as employees rather than independent contractors, making them eligible for certain benefits and employee protections.
In a direct response to AB5, ride sharing companies put forth Proposition 22, which maintained independent contractor status for drivers while still requiring companies to provide drivers with certain benefits. In a victory for ride-share companies, Proposition 22 was approved by California voters in November 2020. However, this victory was short lived because in early 2021, groups including Uber, Lyft and DoorDash filed suit in Alameda County Superior Court challenging the constitutionality of Prop 22. In August 2021, the superior court judge agreed with the plaintiffs and declared Proposition 22 invalid in its entirety.
Two years down the line, the Court of Appeal in Castellanos has now overturned the previous 2021 decision, upholding the classification of ride-share drivers as independent contractors. The court's ruling hinged on the interpretation that California's Constitution does not mandate every worker to be entitled to workers' compensation. The court pointed out that the Legislature or voters have the authority to exclude app-based drivers from such benefits entirely, and, in this context, Proposition 22 does not infringe upon the California Constitution.
With Castellanos' ruling, many experts now wonder if other industries could pass similar initiatives to Proposition 22, and exempt their own workers from AB5's classification requirements. What is known definitively, is that Castellanos does not mark the end of the ongoing debate over ride-share driver classification as opponents of Proposition 22 are now appealing to the California Supreme Court. As this situation surrounding ride-share classification continues to evolve, we will be sure to provide readers with updates as the future landscape of the gig economy in California continues to be uncertain.