26 Litigating CA Wage & Hour Class and PAGA Actions (24th Edition) Seyfarth Shaw LLP | www.seyfarth.com prevailing on the merits of the claim that the ride-share companies were misclassifying drivers as independent contractors in violation of AB 5.129 In 2020, the Court of Appeal affirmed, holding that the trial court did not abuse its discretion in granting the preliminary injunction. The trial court had focused on the companies’ inability to meet Prong B of the ABC test: whether their drivers perform work outside the usual course of defendants’ businesses.130 The trial court found that despite attempts to characterize the drivers as the ride-share companies’ “customers,” for whom the ride-share companies provide the service of matching drivers with passengers, the State’s eventual success on the merits was almost “inevitable.”131 The trial court acted within its discretion in concluding that rectifying the various forms of irreparable harm shown by the State would more strongly serve the public interest than protecting the ride-share companies, their shareholders, and all those who had come to rely on the advantages of online ride-sharing delivered by a business model that does not provide employment benefits to drivers.132 But then the California voters spoke. In November 2020, California voters overwhelmingly passed Proposition 22, the Protect App-Based Drivers and Services Act.133 Proposition 22 classifies certain app-based ridesharing and delivery drivers as independent contractors, provided they (i) maintain control over their schedules, (ii) need not accept a particular “gig,” and (iii) are not restricted from performing services for multiple companies (except during their engaged time). Proposition 22 also entitles app-based drivers to certain benefits, such as a minimum compensation, time-and-ahalf for overtime, paid sick time, unemployment insurance, bargaining rights, per-mile compensation, and a health care subsidy (for drivers who average 15 hours per week of engaged time in a calendar quarter).134 In July 2024, the California Supreme Court unanimously upheld Proposition 22 as constitutional in Castellanos v State of California.135 In Castellanos, the plaintiffs argued that by entirely removing app-based drivers from California’s workers’ compensation laws, Proposition 22 conflicted with the California Constitution, which vests the Legislature with “unlimited” power to govern workers’ compensation.136 In rejecting this argument, the Court looked at the legislative history behind this provision of the state constitution and concluded that it “was a response to constitutional challenges to the existing workers’ compensation system” and “does not show that the amendment was meant to limit the initiative power in any respect.”137 The Court emphasized the need to avoid (1) unnecessarily restricting the electorate’s power to enact laws through ballot initiatives and (2) giving “the Legislature what would essentially be a first-mover advantage, precluding the electorate from undoing any action the Legislature takes pursuant to [the state constitution].”138 Since the initiative power includes “the power to 129 Id. at 281. 130 Id. at 319. 131 Id. at 301. 132 Id. at 328. 133 Bus. & Prof. Code §§ 7448 et seq. 134 In Lawson v. Grubhub, Inc., the Ninth Circuit “conclude[d] without difficulty that Proposition 22 does not apply retroactively.” 13 F.4th 908, 914 (9th Cir. 2021). The court reasoned that “California has a settled presumption against interpreting statutes—including ballot propositions—as having retroactive application.” Id. 135 16 Cal. 5th 588 (2024). 136 Id. at 596. 137 Id. at 606. 138 Id. at 607.
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