HECTOR CASTELLANOS et al., Plaintiffs and Respondents, v. STATE OF CALIFORNIA et al., Defendants and Appellants; PROTECT APP-BASED DRIVERS AND SERVICES et al., Interveners and Appellants.
S279622
IN THE SUPREME COURT OF CALIFORNIA
July 25, 2024
Justice Liu authored the opinion of the Court, in which Chief Justice Guerrero and Justices Corrigan, Kruger, Groban, Jenkins, and Evans concurred.
S279622
Opinion of the Court by Liu, J.
This case concerns
Plaintiffs Hector Castellanos, Joseph Delgado, Saori Okawa, Michael Robinson, Service Employees International Union California State Council, and Service Employees International Union assert that
We agree with the Attorney General that
I.
“The right to workers’ compensation benefits is ‘wholly statutory,‘” “exclusive of all other statutory and common law remedies, and substitutes a new system of rights and obligations for the common law rules governing liability of employers for injuries to their employees.” (Graczyk v. Workers’ Comp. Appeals Bd. (1986) 184 Cal.App.3d 997, 1002, 1003.) The workers’ compensation statutes are based on the theory that the common law remedy for work injuries “involves intolerable delay and great economic waste, gives inadequate relief for loss and suffering, operates unequally as between different individuals in like circumstances, and . . . is inequitable and unsuited to the conditions of modern industry.” (Western Indem. Co. v. Pillsbury (1915) 170 Cal. 686, 693 (Western Indemnity).)
In 2019, the Legislature enacted Assembly Bill No. 5 (2019–2020 Reg. Sess.) (Assembly Bill 5) to address “[t]he misclassification of workers as independent contractors,” which it identified as “a significant factor in the erosion of the middle class and the rise in income inequality.” (Stats. 2019, ch. 296, § 1, subd. (c).) The Legislature sought to ensure that misclassified workers “have the basic rights and protections they deserve under the law, including a minimum wage, workers’ compensation if they are injured on the job, unemployment insurance, paid sick leave, and paid family leave.” (Stats. 2019, ch. 296, § 1, subd. (e).) To achieve this aim, Assembly Bill 5 codified the “ABC test” set forth in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903. (Stats. 2019, ch. 296, § 1.) Under that test, a worker is an independent contractor only if the hiring entity establishes: “(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 the 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.” (Dynamex, at pp. 916–917; see
Assembly Bill 5 took effect in January 2020. (Stats. 2019, ch. 296, § 2.) In October 2020, the Court of Appeal in People v. Uber Technologies, Inc. (2020) 56 Cal.App.5th 266, 273, prohibited Uber and Lyft from misclassifying their drivers as independent contractors under Assembly
In November 2020, Protect App-Based Drivers and Services supported Davis White and Keith Yandell in placing Proposition 22 on the general election ballot. Proposition 22 states that its purposes are to “protect the basic legal right of Californians to choose to work as independent contractors with rideshare and delivery network companies,” “protect the individual right of every app-based rideshare and delivery driver to have the flexibility to set their own hours for when, where, and how they work,” and “require rideshare and delivery network companies to offer new protections and benefits for app-based rideshare and delivery drivers, including minimum compensation levels, insurance to cover on-the-job injuries, automobile accident insurance, health care subsidies for qualifying drivers, protection against harassment and discrimination, and mandatory contractual rights and appeal processes.” (§ 7450, subds. (a), (b) & (c).) Proposition 22 passed with the support of 58.6 percent of the voters and enacted sections 7448 to 7467 of the Business and Professions Code.
The statute defines a “‘network company‘” as a business entity that “maintains an online-enabled application or platform used to facilitate delivery [or transportation] services within the State of California on an on-demand basis . . . .” (
In February 2021, plaintiffs filed a petition for writ of mandate in Alameda County Superior Court, naming the State of California and Katie Hagen, Director of the Department of Industrial Relations, as defendants. By stipulation of the parties, the trial court granted interveners leave to oppose the petition as real parties in interest. The petition alleged that “Proposition 22 conflicts with article XIV, section 4, by purporting to entirely remove app-based drivers from the ‘complete system of worker‘s compensation’ the Legislature has extended to them and to limit the authority of the Legislature to extend such worker‘s compensation benefits to app-based drivers in the future.” Plaintiffs further contended that “the entirety of Proposition 22 must be invalidated” because
The trial court found Proposition 22 “constitutionally problematic” because under
The Attorney General and interveners appealed, and a divided Court of Appeal reversed. The court first concluded that under
Justice Streeter disagreed with the Court of Appeal‘s conclusion that Proposition 22 does not conflict with
Plaintiffs petitioned for our review. We granted the petition and later limited the issue to be argued and briefed as follows: “Does Business and Professions Code section 7451, which was enacted by Proposition 22 (the ‘Protect App-Based Drivers and Services Act‘), conflict with article XIV, section 4 of the California Constitution and therefore require that Proposition 22, by its own terms, be deemed invalid in its entirety?”
In addressing this question, we begin by examining whether the Legislature‘s plenary power under
A.
Plaintiffs assert that the phrase “unlimited by any provision of this Constitution” (the “unlimited” clause) in
Our analysis is guided by McPherson, supra, 38 Cal.4th 1020, where we examined the only other provision of the California Constitution that expressly references the Legislature‘s plenary power, unlimited by any other constitutional provision, to take a specified action. That provision is
As McPherson observed, the initiative power is recognized in
Mindful of these principles, this court in McPherson rejected the view that
Relying on McPherson, the Court of Appeal reasoned that “article XIV, section 4‘s ‘unlimited’ clause cannot mean that workers’ compensation laws are exempt from every other aspect of the Constitution” and that “it is ambiguous as to which aspects of the Constitution continue to apply and which do not.” (Castellanos, supra, 89 Cal.App.5th at p. 150.) Although Proposition 22 differs in some respects from the initiative statute at issue in McPherson, we agree with the Court of Appeal that McPherson is instructive when interpreting the “nearly identical” “unlimited” clause of
Plaintiffs attempt to distinguish
Plaintiffs respond that “[e]ven if the 1918 voters did not have the initiative power in mind,” the “broad and comprehensive” language of the “unlimited” clause supports their view that the clause limits the initiative power. But even plaintiffs do not endorse a literal reading of the “unlimited” clause such that the Legislature would be entirely free of constitutional checks or constraints in the area of workers’ compensation. The clause requires interpretation, and without a specific indication that the 1918 voters who enacted the clause meant to limit the initiative power, it is “‘our judicial policy to apply a liberal construction to this power wherever it is challenged in order that the right be not improperly annulled.’ ” (Associated Home Builders, supra, 18 Cal.3d at p. 591.)
Next, plaintiffs assert that the “unlimited” clause here is not ambiguous because
Like the Court of Appeal, we believe the phrase “by appropriate legislation” in
In sum, guided by McPherson‘s reasoning, we conclude that the “unlimited” clause is ambiguous and that there is no textual or historical basis to construe it to apply solely to the initiative power.
B.
To discern the meaning of the “unlimited” clause, the Court of Appeal consulted the ballot materials from the 1918 election at which an amendment to former article XX, section 21 added the “unlimited” clause and enacted what is now
A review of the historical background of the 1918 amendment confirms our conclusion in Mathews. In 1911, the Roseberry Act (Stats. 1911, ch. 399, § 1, p. 796) established a voluntary system of workers’ compensation. (Mathews, supra, 6 Cal.3d at p. 729.) One month later, the voters approved article XX, section 21 (now article XIV, § 4), which provided in relevant part, “The Legislature may by appropriate legislation create and enforce a liability on the part of all employers to compensate their employees for any injury incurred by the said employees in the course of their employment irrespective of the fault of either party.” (Mathews, at p. 730, italics omitted, quoting
Between 1913 and 1918, the Boynton Act was challenged on multiple constitutional grounds. (See, e.g., Western Indemnity, 170 Cal. 686; Western Metal Supply Co. v. Pillsbury (1916) 172 Cal. 407.) In Western Indemnity, we characterized the Boynton Act as “radical” but held that it did not violate the California Constitution or the Fourteenth Amendment to the United States Constitution. (Western Indemnity, at p. 692, see id. at p. 701.) Justice Henshaw disagreed, describing the Boynton Act as “obnoxious to the constitutional provisions guaranteeing equal protection, and forbidding confiscation,” and predicting that the United States Supreme Court would grant review of our decision. (Western Indemnity, at p. 716 (dis. opn. of Henshaw, J.); see id. at p. 721 (dis. opn. of Henshaw, J.).) Justice Shaw agreed with Justice Henshaw that, under some circumstances, application of the Boynton Act “would be a taking for a public purpose without lawful excuse or right and without compensation.” (Western Indemnity, at p. 735 (conc. opn. dubitante of Shaw, J., on rehg. den.).) Together, Justice Henshaw and Justice Shaw “cast doubt on whether former article XX, section 21, provided adequate support for the Boynton Act as a matter of state law.” (Castellanos, supra, 89 Cal.App.5th at p. 184 (conc. & dis. opn. of Streeter, J.).)
In 1918, the electorate was presented with an amendment to article XX, section 21 to address those doubts. The ballot materials explained that “[t]he proposed amendment [wa]s designed to express full authority for legislation; to sanction, establish and protect the full plan in all essentials where the courts ha[d] not already passed upon it.” (Mathews, supra, 6 Cal.3d at p. 733, fn. 11, italics omitted.) The ballot materials also called the amendment “‘a necessary amplification and definition of the constitutional authority vested in the legislature by the amendment to the Constitution adopted October 10, 1911, to enable the enactment of a complete plan of workmen‘s compensation . . . .‘” (Ibid.) The materials further stated, “Our workmen‘s compensation act . . . should be put upon a firm constitutional basis, beyond the possibility of being attacked on technical grounds or by reason of any questioned want of constitutional
In light of this purpose, Mathews rejected a claim that the 1918 amendment invalidated one of the “basic features” of existing workers’ compensation laws (Mathews, supra, 6 Cal.3d at p. 735) — “conditioning the right to compensation upon the absence of wilful misconduct or other intentional wrongdoing” (id. at pp. 724–725). According to Justice Streeter, Mathews‘s preservation of this “basic feature” of the workers’ compensation system suggests that “there is a minimum constitutional baseline to our workers’ compensation system no statute can go below” and that Proposition 22 falls below that baseline. (Castellanos, supra, 89 Cal.App.5th at p. 181 (conc. & dis. opn. of Streeter, J.).) But this misconstrues Mathews. As the Court of Appeal explained, “[t]he point of Mathews was only that article XIV, section 4 was intended to authorize the workers’ compensation system that already existed — not that those features became sacrosanct and untouchable by either the Legislature or the electorate.” (Castellanos, at p. 151, fn. 8.)
Like Justice Streeter, plaintiffs assert that the 1918 workers’ compensation system “contained the basic elements necessary to protect workers and their families” and that Proposition 22 “lacks those basic elements,” thereby “frustrat[ing] the social public policy” declared by
In sum, the history of the 1918 amendment that codified, in all material respects, the present version of
C.
Plaintiffs further contend that McPherson is inapposite because of an express limitation in that decision. As noted, McPherson held that the Legislature‘s
We agree that
As for plaintiffs’ further concern that section 7451 improperly limits the Legislature‘s ability to enact future workers’ compensation laws, we agree with the Attorney General that section 7451 does not, by its terms, limit the Legislature‘s power to enact workers’ compensation laws. Section 7451 operates to classify app-based drivers as independent contractors instead of employees when certain criteria are met. Against the backdrop of existing law, this classification renders app-based drivers ineligible for workers’ compensation because eligibility generally depends on the existence of an employment relationship. (
Plaintiffs acknowledge that “[a]n initiative statute that did not prevent the Legislature from providing app-based drivers with a complete system of workers’ compensation could be harmonized with article XIV.” But they argue that such action by the Legislature would be stymied by section 7465‘s directives that the Legislature may only amend the initiative by passing a statute (with a seven-eighths majority vote) that “is consistent with, and furthers the purpose of, this chapter,” and that “[a]ny statute that amends Section 7451 does not further purposes of this chapter.” (§ 7465, subds. (a), (c)(2).) As plaintiffs put it, “future legislation providing workers’ compensation benefits to app-based drivers ... would constitute an impermissible amendment of section 7451.” What this means, according to plaintiffs, is that any act by the Legislature to restore workers’ compensation eligibility to app-based drivers would require voter approval because
The Attorney General responds that “[i]t would be premature to address any questions about the Legislature‘s power to enact future legislation that defines app-based drivers as workers entitled to workers’ compensation” because we cannot “predict what shape such legislation might take and what the relevant constitutional analysis would be in assessing its validity.” We agree. Without any specific legislation before us, we have no occasion to decide whether a statute providing app-based drivers workers’ compensation would necessarily constitute a statute that “amends Section 7451” (§ 7465, subd. (c)(2)) and triggers the voter approval requirement of
Under section 7465, the Legislature may amend provisions of Proposition 22 other than section 7451 as long as such an amendment “is consistent with, and furthers the purpose of, this chapter” and obtains a seven-eighths majority vote in each house of the Legislature. (§ 7465, subd. (a).) Plaintiffs and the Attorney General contend that section 7465‘s supermajority requirement may conflict with
We explained that “[o]ur concern over potential conflict arises because
Plaintiffs observe that section 7465, unlike
We have no need in this case to decide the applicability of our reasoning in County of Los Angeles to Proposition 22 or to determine the extent to which
Plaintiffs assert in their reply and answer to amicus curiae briefs that the Legislature has already extended workers’ compensation benefits to app-based drivers through Assembly Bill No. 1766 (2023-2024 Reg. Sess.) (Assembly Bill 1766), which was enacted after Proposition 22. (Stats. 2023, ch. 133.) They point to a provision of Assembly Bill 1766 that prospectively revised the definition of “employee” in
CONCLUSION
We affirm the judgment of the Court of Appeal insofar as it held that
LIU, J.
We Concur:
GUERRERO, C. J.
CORRIGAN, J.
KRUGER, J.
GROBAN, J.
JENKINS, J.
EVANS, J.