The Law the Platforms Bought Back

Two Routes to the Same Question

Assembly Bill 5, signed by Governor Gavin Newsom on 18 September 2019, codified the ABC test that the California Supreme Court had established in Dynamex Operations West, Inc. v. Superior Court the previous year. Under AB5, a hiring party wishing to classify a worker as an independent contractor had to satisfy all three prongs: the worker was free from the company's control; the work fell outside the company's usual course of business; and the worker was customarily engaged in an independently established trade or occupation. The second prong alone was fatal to the gig model — a driver whose entire working life runs through a rideshare app cannot plausibly be described as performing work outside that app company's core business.

AB5 applied across the California economy, but its target was unmistakable. Uber, Lyft, DoorDash, Instacart, and Postmates had built their cost structures on contractor classification, and reclassification as employees would have required minimum wage, overtime, unemployment insurance, and expense reimbursement. The legislation passed the state legislature with substantial Democratic majorities and took effect on 1 January 2020.

The platforms' response was not to comply. It was to fund a ballot initiative. Proposition 22 — the "App-Based Drivers as Contractors and Labor Policies Initiative" — went on the November 2020 ballot after Uber, Lyft, DoorDash, Instacart, and Postmates collectively spent approximately $200 million on the campaign, a figure reported by the California Secretary of State and widely cited as the most expensive ballot initiative campaign in state history to that point. The measure created a third category: app-based drivers remained independent contractors but received a guaranteed earnings floor, mileage reimbursement, a healthcare stipend for drivers working sufficient hours, and occupational accident insurance. It did not provide unemployment insurance, collective bargaining rights, or workers' compensation in the standard sense.

Proposition 22 passed on 3 November 2020 with approximately 58 percent of the vote. The legislative route — statute, democratic deliberation, committee hearings, expert testimony — had produced AB5. The ballot route had produced its partial undoing, financed overwhelmingly by the parties it was designed to constrain.

The Litigation Afterwards

Passage did not end the dispute. In January 2021, a coalition of gig workers and the Service Employees International Union filed suit in Alameda County Superior Court, arguing that Proposition 22 was unconstitutional under the California Constitution, which prohibits ballot measures from limiting the legislature's power to provide workers' compensation or from combining multiple subjects in a single measure. Judge Frank Roesch ruled for the plaintiffs in August 2021, holding that Proposition 22 was unconstitutional in its entirety. The California First District Court of Appeal reversed in March 2023, finding the measure largely constitutional but severing one provision that purported to define how Proposition 22 itself could be amended. The California Supreme Court agreed to review the matter and, in July 2024, upheld Proposition 22.

The episode illustrates something the legislative record alone cannot show: classification law is now contested simultaneously in multiple arenas — courts, legislatures, regulatory agencies, and the direct democracy mechanism of the ballot initiative. Each arena has different access rules and different financing dynamics. A statute requires lobbying and coalition-building within a deliberative body. A ballot campaign requires money for signature gathering, advertising, and ground operations — resources that accrue disproportionately to well-capitalised incumbents. The $200 million Proposition 22 campaign was not an aberration; it was a demonstration of what the ballot route costs and who can afford it.

Whether the third-category model Proposition 22 created — neither employee nor the old independent contractor — proves durable, or whether courts ultimately collapse it, will shape how other jurisdictions approach the same problem. The EU's Platform Work Directive, adopted in 2024, took the legislative route and built in a rebuttable presumption of employment rather than a carved-out category. The comparison is not coincidental.