Independent Contractor Misclassification and Compliance News August 2021

As the independent workforce continues to grow, so do the issues of worker compliance and misclassification. It is important for enterprises to remain informed about the latest laws, regulations, and developments surrounding these topics. Each month, we’ll bring you the latest news stories from around the web.

1. CA Court says Ballot Measure that Made App-based Drivers Independent Contractors is Unconstitutional Under California’s Constitution

A California court reviewed challenges to Proposition 22—the ballot measure that was adopted by California voters in November that made app-based drivers independent contractors—and found that it violated California’s constitution and was therefore unenforceable. Hector Castellanos, et al. v. State of California, et al., Case Number S266551.

In 2018, in Dynamex Operations W., Inc. v. Superior Court (2018), the California Supreme Court said that the standard for determining whether a worker was an employee or independent contractor was the ABC test. The ABC test says that a worker is an employee unless the business can show:

(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

The California legislature adopted the ABC test for most workers in 2019 and enacted AB5 which became effective January 1, 2020. AB5 says that the ABC tests applies to all workers but also included a list of exceptions. In 2020, the legislature modified the exceptions in AB 2257.

In 2020, app-based companies including Uber and Lyft drafted and collected enough signatures to put a referendum question on ballot. The ballot question, Proposition 22, said that app-based drivers were independent contractors and not employees. The ballot question passed overwhelmingly.

After the passage of Proposition 22, opponents challenged the validity of the law. The challenges were nuanced and alleged violation of parts of the California Constitution. The judge considered the arguments and concluded that Proposition 22 violated California’s Constitution because it:

• Limited the power of future legislatures to define app-based drivers as subject to workers compensation laws. The California Constitution gives the legislature plenary powers with respect to workers compensation. The court that if the people want to limit the “plenary” powers of the legislature granted by the California Constitution, then the people must first amend the California Constitution.
• Limited the legislature’s ability to pass legislation that does not constitute an amendment to the initiative. An initiative statute cannot limit subsequent legislation unless that subsequent legislation would constitute an “amendment” to the initiative. Proposition 22 prohibits app-based drivers from engaging in collective bargaining.
• Was not limited to one subject. The California Constitution says that an initiative measure cannot not address more than one subject. The Court said that the inclusion of the limitation on collective bargaining was not germane to Proposition 22’s stated purpose.

The Court’s decision will be appealed.

2. Massachusetts Group Files Ballot Initiative to Allow App-based Drivers to be Independent Contractors

In Massachusetts, a coalition of app-based workers and partners filed a ballot initiate that would a be a referendum question on the 2022 ballot. At the same time that a California court was saying that the California initiative was unconstitutional, the Massachusetts Coalition for Independent Work filed an initiative petition. The initiative that would grant new benefits for app-based rideshare and delivery drivers while allowing them to be independent contractors.

The proposed ballot question:

• Allows app-based drivers to be independent contractors.
• Provides benefits, including healthcare stipends, paid sick time, paid family & medical leave, and occupational accident insurance.
• Guarantees app-based rideshare and delivery drivers earnings of 120% of the state minimum wage ($18 per hour for 2023), not including tips.
• Protects app-based rideshare and delivery drivers against discrimination and provides an opportunity to appeal account deactivation.
• Trains drivers on critical public safety issues like recognition and prevention of sexual assault and misconduct, collision avoidance and defensive driving, and proper handling of food or grocery deliveries.

The coalition includes Uber, Postmates, DoorDash, Instacart, and Lyft.

At the same, a group has organized to oppose the ballot question. The Coalition to Protect Workers Rights includes Shannon Liss-Riordan, well known plaintiff’s attorney, and representatives from the Massachusetts AFL-CIO and Massachusetts Building Trades Council,

For more information, check out our resources page on misclassification and compliance. If you have any questions about engagement, classification, or management of your independent workforce, we’re always here to help.