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Industry Insights

Grinberg: COA Upholds Prop. 22. Should Other Industries Follow?

  • State: California

I hope you are staying dry and not being blown away by the crazy winds. It can be dangerous driving in these stormy conditions, especially when you are busy reading these blog posts or thinking of new ways to deny benefits. Accordingly, you might consider taking an Uber or Lyft to get from point “A” to point “your claim is denied.”

Gregory Grinberg

Gregory Grinberg

Have you heard the good news out of the California Court of Appeal? In a published decision in the case of Castellanos v. State of California, the majority panel declined to strike down Proposition 22 as unconstitutional. Remember Proposition 22? It was the ballot initiative that effectively excluded various gig economy entities from the ravages of Assembly Bill 5. In short, it allowed for the preservation of the “independent contractor” relationship rather than the effective presumption of employment brought about by AB 5. 

With Prop. 22 in effect, individuals who choose to use software provided by such companies to engage in gig work would not be entitled to status as “employees” and remain independent contractors. 

Well, several of these individuals unhappy with the option of simply not engaging in an agreement to such terms decided to sue, and a Superior Court ruled that Proposition 22 was unconstitutional. That ruling was met with an appeal and now we see Prop. 22 survives to fight another day.

Likely, this will go to the California Supreme Court, but let’s toy with the idea for a second that the Supreme Court affirms and, by initiative, California can carve out exemptions to the heavy presumption of employment vs. independent contractor status.  Can the results be replicated in other areas of California’s industry?

For example, could a coalition form of various somewhat related industries and exempt their respective employees in the same way? What if enough restaurant groups cobbled together a bill allowing workers to opt out of employment for some higher salary? If a waiter offered minimum wage plus tips as an employee or $5 per hour above minimum wage were to opt out and buy his or her own insurance for health and disability, would any waiters take the deal?

Depending on the ultimate fate of Prop. 22, perhaps this is a model for California’s long-besieged employers to escape the invariably expensive and borderline punitive workers’ compensation system.

Now, you might be thinking, “Greg, you handsome devil, are you talking yourself out of a job?” Well, not necessarily. Work will continue to get done. Injuries will continue to happen. Fraud will continue to abound. If more industries took the Proposition 22 route, coverage for these injuries will continue, but the policyholders could very well become the independent contractors, rather than the employers. It’s a crazy new world I'm imagining, but not one entirely different than the one we know now.

What do you think? Will more industries push through initiatives to carve out an escape from workers’ comp? Or is Prop. 22 to stand alone for the gig economy?

Gregory Grinberg is managing partner of Gale, Sutow & Associates’ S.F. Bay South office and a certified specialist in workers’ compensation law. This post is reprinted with permission from Grinberg’s WCDefenseCA blog.

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