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California

The “Golden State” is the plaintiffs’ bar’s laboratory for finding innovative new ways to expand liability through both the courts and legislature. These novel theories of liability are burdening small businesses and bogging down the state’s economy. Even in areas where the U.S. Supreme Court has stepped in to rein in lawsuit abuse, the California Supreme Court has disregarded precedent and expanded liability.

From abusive Proposition 65 and Private Attorneys General Act (PAGA) litigation, to serial plaintiffs filing hundreds of lawsuits under the Americans with Disabilities Act, the list of issues with the state’s civil justice system is endless. Rather than address the abuses and improve the litigation climate, state leaders seem to embrace the Judicial Hellholes® moniker.

Prop-65

Proposition 65, a well-intentioned law enacted in 1986, has become one of the plaintiffs’ bar’s favorite tools to exploit. Baseless Prop-65 litigation unjustly burdens companies that do business in California.

Through October 18, 2023, there were 797 Prop-65 settlements for a total of more than $18.9 million with $16.68 million (88%) going towards attorneys’ fees and costs.

Under Prop-65, businesses are required to place ominous warning signs on products when tests reveal the presence of even the slightest, non-threatening trace of more than 1,000 chemicals that state environmental regulators deem carcinogenic or otherwise toxic.

Eight new chemicals were added in 2023. Failure to comply can cost up to $2,500 per day in fines, and settlements can cost $60,000 to $80,000. Through October 18, 2023, there were 797 Prop-65 settlements for a total of more than $18.9 million with $16.68 million (88%) going towards attorneys’ fees and costs.

A troublesome part of the law allows private citizens, advocacy groups and attorneys to sue on behalf of the state and collect a portion of the monetary penalties and settlements, creating an incentive for the plaintiffs’ bar to pursue these types of lawsuits. Law firms identify serial plaintiffs who are willing to file multiple lawsuits despite not suffering any injuries or harm.

Serial Plaintiffs

Each year, plaintiffs’ lawyers send thousands of notices to companies threatening Prop-65 lawsuits and demanding a settlement. Food and beverage companies are among the prime targets. Over the last decade (2012-2022), what are known as Prop-65 “60-day notice” filings increased from 908 in 2012 to 3,170 in 2022, a rise of 250%. These notices are often sent by organizations or individuals to companies asserting a Prop-65 violation, threatening suit, and demanding labeling changes and monetary settlement. As of November 1, 3,382 had been filed in 2023, already exceeding the prior year’s total.

The money companies spend on compliance and litigation unnecessarily drives up the cost of goods for California consumers. It also harms small businesses that do not have the in-house expertise or means to evaluate the need for mandated warnings or handle litigation.

Glyphosate

The most infamous Prop-65 case involves Monsanto’s Roundup® products. California added the popular weed killer’s active ingredient, glyphosate, to the Prop-65 listing in July 2017.

Regulators and scientists worldwide have deemed glyphosate safe, except for the International Agency for Research on Cancer (IARC), whose study was riddled with controversy. The single IARC report stating glyphosate is carcinogenic is in stark contrast to more than 800 studies submitted to the U.S. Environmental Protection Agency (EPA).

In June 2020, the National Association of Wheat Growers filed a lawsuit seeking an injunction to block California’s attorney general from requiring a cancer warning on glyphosate products. The district court granted the injunction the same month and the case was appealed to the Ninth Circuit.

In response to this litigation, the California Office of Environmental Health Hazard Assessment amended the regulation to no longer require the phrase, “Glyphosate is known to the state of California to cause cancer.” The amended phrasing guidelines, which took effect on January 1, 2023, still require manufacturers to warn of the risk of glyphosate but allows them to acknowledge that competing studies exist on whether the chemical is linked to cancer.

In November, the Ninth Circuit affirmed the district court’s injunction, finding a First Amendment violation in the latest cancer warning imposed by the state. While compelled government speech may be exempted from scrutiny if it is “purely factual and uncontroversial” under the Zauderer standard set by the U.S. Supreme Court in 1985, the warning fell short of these criteria. Highlighting the stark lack of consensus in the scientific community regarding the link between glyphosate and cancer, the panel stated that even with the OEHHA’s amendments, the warning “still conveys the overall message that glyphosate is unsafe which is, at best, disputed.” The panel concluded that none of the warning iterations were narrowly tailored to advancing the state’s interest in protecting consumers from carcinogens. Further, the Court noted that the state has “less burdensome ways to convey its message than to compel Plaintiffs to convey it for them.”

Personal Injury Litigation

California courts’ willingness to rely on junk science has given rise to thousands of baseless personal injury claims against Roundup®. These cases have had mixed results with Monsanto winning a vast majority of the more recent cases. However, in October, a San Diego jury delivered a $332 million verdict against Monsanto, finding that its alleged negligence in designing Roundup® and failure to warn of its health risks substantially contributed to the plaintiff’s cancer. Notably, the award consisted of $325 million in punitive damages, along with $7 million in noneconomic damages. Expressing its intent to appeal, the company pointed out that significant legal and evidentiary errors were made during the trial, and that it had resolved most of the claims of this case in previous Roundup® litigation victories.

Prop-65 & Food Litigation

Over the past five years, Prop-65 pre-litigation notices targeting the food and beverage and supplement industries have been on the rise. Allegations that products contain traces of heavy metals, such as lead, cadmium, and arsenic are most common, accounting for over 90% of all notices in 2022. The key product categories for notices relating to heavy metals include seafood products, spices, and protein supplements.

PROP-65 PRE-SUIT NOTICES OF VIOLATION (SOURCE)

Year 2019 2020 2021 2022
Food & Beverage 413 1328 1046 1174
Supplements 121 218 202 183
[T]he warning “still conveys the overall message that glyphosate is unsafe which is, at best, disputed.”
U.S. Ninth Circuit, National Association of Wheat Growers et al. v. Bob Bonta et al.

NO-INJURY LAWSUITS BOG DOWN STATE ECONOMY, DRIVE BUSINESS OUT OF STATE

California Supreme Court Ignores U.S. Supreme Court, Expands Liability Under ‘Private Attorney General Act’

Enacted in 2004, California’s Private Attorneys General Act (PAGA) has become known as the “Sue Your Boss” law. While its initial purpose was to protect workers, it has done little to help them. The plaintiffs’ bar has been the true beneficiary.

PAGA authorizes “aggrieved” employees to file lawsuits seeking civil penalties on behalf of themselves, other employees, and the State of California for labor code violations. Many PAGA lawsuits revolve around technical nitpicks, such as an employer’s failure to print its address on employees’ pay stubs, even though the address was printed on the paychecks themselves.

Three quarters of the penalties paid by non-compliant employers go to the state’s Labor and Workforce Development Agency while only 25 percent go to the “aggrieved employees” and their lawyers who take a third or so of that. In some cases, the plaintiffs’ lawyers receive even more.

Standing in PAGA Claims

In June 2022, the U.S. Supreme Court issued a decision in Viking River Cruises v. Moriana that many hoped would impact California plaintiffs’ lawyers’ ability to circumvent arbitration agreements.

The U.S. Supreme Court held that the Federal Arbitration Act (FAA) prohibits California courts from not enforcing employment arbitration agreements as it violates each litigant’s right to agree to resolve disputes without litigation. Therefore, the Court ruled that a dispute between a plaintiff and Viking Cruises should be decided through arbitration, as provided by the agreement, and the representative claims (those the plaintiff brought on behalf of other people) should be dismissed, as the plaintiff no longer has standing to bring them.

As a result of the U.S. Supreme Court’s ruling, the California Supreme Court agreed to hear Adolph v. Uber, recognizing that the lower court’s decision may conflict with the Viking Cruises decision. In Adolph, an Uber driver sued the company in state court, alleging Uber misclassified him as an independent contractor. Despite signing an arbitration clause in his employment contract with Uber, he sought statutory damages under PAGA in court. Uber filed a motion to compel arbitration of the individual claim and dismiss the representative claims. Nevertheless, both the trial court and appellate court denied the motion and allowed both the individual and representative claims to move forward.

In July 2023, the California Supreme Court strayed from the Viking decision and held that representational PAGA claims can stay in court even when individual claims are sent to arbitration. According to the Court, “an order compelling arbitration of the individual claims does not strip the plaintiff of standing as an aggrieved employee to litigate claims on behalf of other employees under PAGA.”

Several cases involving arbitration clauses were pending as California courts awaited this decision. Adolph opened the floodgates for these PAGA claims, and others, to proceed in the trial courts.

Manageability of PAGA Claims

The California Supreme Court is reviewing whether PAGA suits can proceed when discovery is “unman- ageable.” The California Fifth District Court of Appeal held that manageability is only a requirement for class actions, not PAGA claims. Allowing “unmanageable” PAGA cases to proceed would unfairly burden defendants and lead to inefficiencies and significant pressure to settle cases because of the overwhelming discovery that plaintiffs would seek.

‘Food Court’

California regained its status as the plaintiffs’ bar’s favorite food court. It beat out New York for the most “no-injury” consumer class action filings targeting the food and beverage industry. About one third of the nation’s lawsuits taking issue with food labeling – 70 of 214 – were filed in California.

These lawsuits often claim that some aspect of a product’s packaging or marketing misleads consumers, even though it is unlikely to have made a difference in anyone’s decision to buy a product.

Trial Lawyers’ Newest Statutory Gold Mine

On January 1, 2023, the California Privacy Rights Act of 2020 (CPRA) went into effect. This Act replaced the California Consumer Privacy Act (CCPA) and addressed some of the CCPA’s ambiguities. It eliminates a business’ 30-day window to cure, grants new rights to consumers, and increases business’s contractual obligations. It also creates the California Privacy Protection Agency to enforce the CPRA, which will fine businesses $2,500 for violations and $7,500 for intentional violations and those involving a minor. While the Act took effect in 2023, it applies to data collected beginning on January 1, 2022.

In July, California Attorney General Rob Banta announced that his office was doing an “investigative sweep” of all large employers in the state to ensure they are in compliance with the Act.

Apart from the attorney general investigations, consumers can sue for cash awards following a data breach without proving an actual injury, making it easy for trial lawyers to bring massive class actions. The law also provides for treble damages and attorneys’ fees, creating a large incentive for the plaintiffs’ bar to file lawsuits.

Americans with Disabilities Act Lawsuit Abuse

In 2022, California was home to nearly one third of the nation’s ADA accessibility litigation. That year, plaintiffs’ attorneys filed 2,519 accessibility lawsuits in California – the state was second to only New York, a fellow Judicial Hellhole®. These are federal lawsuits claiming that businesses violated standards under the ADA that are intended to ensure that public places are accessible to everyone but have been abused by serial plaintiffs and certain attorneys.

In California, penalties for accessibility violations are much higher due to the state’s Unruh Civil  Rights Act, which provides for a fine of $4,000 per violation, a fine other states do not have, plus attorneys’ fees. Often these so-called “violations” are as minor as a mirror that is an inch too high or a sidewalk or parking lot that is angled one degree too much.

In the first half of 2023, there were 1,020 ADA lawsuits filed in California federal courts. This represents a 35.8% decline from the 1,587 lawsuits filed in the first half of 2022. However, California still had the second-highest number of federal ADA filings among other states.

California’s dip in filings may in part be attributed to less filings by Potter Handy LLP and the Center for Disability Access. As a result of their lawsuit abuse, these entities were hit with actions by the San Francisco and Los Angeles District Attorneys.

The Potter Handy law firm set up the Center for Disability Access (CDA) and filed thousands of lawsuits on behalf of just a handful of plaintiffs over the past few years. For example, CDA worked with a quadriplegic plaintiff to file over 4,000 ADA claims in California from 2010 to 2021, which amounts to roughly 1 lawsuit per day for 11 straight years. The plaintiff filed over 1,000 claims in 2021 alone, forcing businesses, already struggling to recover from the pandemic, to close for good. A federal grand jury indicted the plaintiff for tax fraud in 2019 after failing to pay taxes on his lawsuit income.

CDA filed 560 ADA claims on behalf of another plaintiff in 2021, bringing his grand total to over  1,700 claims filed. In one suit, federal Judge Vince Chhabria (Northern District) levied a $35,000 sanction against CDA for conspiring to falsify pleadings. “You may not lie in an effort to keep your lawsuit alive. And that is the real problem here,” said Judge Chhabria in his sanction order.

In April 2022, the San Francisco and Los Angeles district attorneys filed a joint suit against Potter Handy for “unlawfully circumventing” California state procedural requirements by “filing thousands of boilerplate, cut-and-paste federal court lawsuits that falsely assert its clients have standing under the [ADA].” The DAs’ action alleged that the sheer number of claims made it “literally impossible for the Serial Filers to have personally encountered each listed barrier, let alone intend to return to hundreds of businesses located hundreds of miles away from their homes.”

The DAs’ action further alleged that these ADA shakedown lawsuits have extracted tens of millions of dollars from California businesses.

Plaintiffs demand between $10,000 and $20,000 to settle, and most businesses have no choice but to pay because litigating a case can cost

$50,000 or more even if the business wins. The opportunistic plaintiffs’ lawyers target mom-and-pop shops with little financial resources, especially owners who speak English as a second language. The lawsuit demanded that CDA return all settlement money to California business owners.

Unfortunately, in August 2022, San Francisco Superior Court Judge Curtis Karnow dismissed the lawsuit. He found that Potter Handy’s filings were covered under the state’s “litigation privilege.” This bars a third-party litigant from using client communications and lawsuit filings as evidence against the firm. The judge found the privilege applies “irrespective of the communication’s maliciousness or untruthfulness.”

The cities appealed the dismissal in October 2022. The Los Angeles DA dubbed the appeal “the best course of action” to guard against more “frivolous boilerplate lawsuits.” Meanwhile, the San Francisco DA said she was appealing “to protect business from predatory law firms that are abusing disability protections by filing these fraudulent lawsuits.” The case is currently pending in the California Court of Appeals for the First District.

Ninth Circuit Decision Emboldens Serial Plaintiffs

In January 2023, the Ninth Circuit issued a disappointing decision that prevents courts from taking the “litigiousness of the plaintiff into consideration.” Here, the plaintiff, Chris Langer, is a paraplegic, serial litigant represented by the Center for Disability Access. He filed a complaint against owners of a lobster shop and smoke shop for lack of accessible parking. This was just one of nearly 2,000 ADA lawsuits that he has filed over the past 30 years.

The district court found Langer’s testimony to be unreliable based on the fact that he was a serial plaintiff and found that he had no intention of returning to or patronizing the establishment. According to District Judge Robert Benitez, “On the day he filed this lawsuit, he also filed six other lawsuits. Yet, [Langer] was unfamiliar with those suits as well as the businesses involved.”

Unfortunately, the Ninth Circuit reversed the district court’s decision, holding that a plaintiff’s motive for visiting a place of public accommodation is irrelevant to standing. District courts are not allowed to “question the ‘legitimacy’ of an ADA plaintiff’s intent to return to a place of public accommodation simply because the plaintiff is an ADA tester or serial litigant.”

The dissent said the majority ignored its “’significantly deferential’ standard of review” and observed it was “implausible to think that Langer intended to actually patronize the nearly 2,000 businesses that he had sued.”

In February, the shop owners filed a petition to rehear the case. The petition was deferred pending the U.S. Supreme Court’s decision in Acheson Hotels v. Laufer, which raises the issue of when a person may sue as a “tester” under the ADA.

LEMON LAW ABUSE

Lawsuit abuse under California’s Song-Beverly Consumer Warranty Act, otherwise known as the California lemon law, has reached a fever pitch and legislative efforts to address the abuse stalled in 2023.

While automobiles have become more reliable and the frequency of problems with them have generally decreased over the past decade, lawsuits under California’s Song-Beverly Consumer Warranty Act have actually increased.

The Song-Beverly Consumer Warranty Act clearly defines the obligations of the manufacturers of consumer goods. Under the law, a manufacturer guarantees that a product is in working order when sold. Should a product fail in utility or performance, the manufacturer must repair or replace the product or make restitution to the buyer in the form of a purchase refund. The Act also limits punitive damages to no more than twice the amount of actual damages.

The intent of the law was to ensure manufacturers would repair, replace, or repurchase a consumer’s defective vehicle as quickly as possible. However, plaintiffs’ lawyers have learned to exploit loopholes in the law and create windfalls for themselves at the expense of a fair resolution for consumers. The law provides an incentive for attorneys to pursue litigation even when companies make a reasonable offer and consumers may be inclined to settle. This draws out the process for consumers and delays the time it takes to reach a fair resolution. The costly litigation also drives up the price of vehicles in the state. The true winners of the prolonged litigation are the plaintiffs’ lawyers. By dragging out a case, they run up hefty legal fees on top of the statutory lemon law fee entitlement.

Courts Make It More Difficult to Reach Timely Resolution

This year, a California appellate court issued a decision that makes it nearly impossible for automobile manufacturers to make things right with consumers on a reasonable, timely basis. In that instance, a consumer had issues with the dashboard media and back-up camera system in a leased 2019 Sentra. The consumer contacted Nissan, and after some back and forth, agreed to a $3,500 settlement and sent the plaintiff a Settlement Agreement and Release. The release stated that the consumer released Nissan from any claims “whether arising in the past or present.” The consumer reviewed and signed the release and received a settlement check in October 2019.

The consumer then filed a lawsuit in May 2020 claiming that the release was void under a provision of the Song-Beverly Act that states “any waivers by the buyer of consumer goods… except as expressly provided” are deemed against public policy and are unenforceable.

The trial court disagreed with the plaintiff, finding that the specific provision applied to waivers “sought on the front end, in connection with the purchase of a product – not to releases negotiated to end disputes…” The trial court also found that “if a lemon law plaintiff is prohibited from waiving the provisions of the Song-Beverly Act in order to settle, no settlement would ever be possible.”

Unfortunately, in June, the Fourth District Court of Appeal reversed the lower court’s decision, finding that the release violated the plaintiff’s substantive rights and is unenforceable as it’s against public policy.

The court found no evidence that the plaintiff was aware of his rights under the Act since he was not represented by counsel. “The circumstances suggest unequal bargaining strength between a consumer unaware of his rights and a manufacturer seeking to circumvent its statutory obligations.”

This decision puts manufacturers in the difficult position of having to advise consumers of their rights under the Song-Beverly Act, their entitlement to repurchase and replace, and that the manufacturer has an affirmative duty to offer those remedies after a reasonable number of repair efforts. It will lead to more time-consuming and inefficient litigation.

Does a Used Car Count as a ‘New Vehicle’?

In July 2022, the California Supreme Court agreed to decide whether a used car should be considered a “new vehicle” under the state’s lemon law. In Rodriguez v. FCA, plaintiffs filed a lemon law claim after expe- riencing issues with a used vehicle they purchased from a car dealership with two years and 55,000 miles of road wear that was still under a manufacturer’s limited warranty.

The trial court granted summary judgment for the manufacturer, holding that a used vehicle cannot qualify as “new,” regardless of its warranty status. The appellate court affirmed the decision and noted that the plaintiff’s position (that any car under a limited warranty still qualifies as “new”) would lead to “problems,” inconsistencies and absurd results.

ARBITRATION UNDER ATTACK

The California courts and legislature have long attempted to undermine the right of employers and employees to enter into arbitration agreements.

Despite the U.S Supreme Court’s clear rulings finding arbitration agreements are enforceable and may not be disfavored by state laws, the California legislature attempted to bar employers from requiring employees to sign agreements to arbitrate claims.

In 2018, the California legislature enacted A.B. 51 to ban arbitration agreements as a condition of employment by essentially “criminalizing the act of entering into an arbitration agreement.” The law deterred employers from using arbitration agreements by preventing contracts from including “non-negotiable terms requiring employees to waive certain rights, including the right to sue.”

In February 2023, the U.S. Court of Appeals for the Ninth Circuit held that the Federal Arbitration Act (FAA) preempts A.B. 51, upholding a lower court’s injunction that temporarily prevented California from enforcing the law. The Ninth Circuit held that the deterrence created by A.B. 51 contravened the FAA’s equal treatment principle.

Case to Watch

The California Supreme Court is deciding whether unfair and unconscionable provisions in an arbitration agreement are severable or if the entire agreement is void. In Ramirez v. Charter Communications, the plaintiff is arguing that an arbitration agreement is a contract of adhesion and procedurally unconscionable. The plaintiff also is arguing that it is substantively unconscionable for several reasons. The defendant disagrees and maintains that even if certain provisions are unconscionable, they should be severed, and the arbitration agreement should still be enforced.

Anti-Arbitration Legislation Enacted

In October, Governor Gavin Newsom signed S.B. 365 into law. The legislation is intended to deter the use of arbitration agreements by not automatically pausing trial court proceedings during the pendency of an appeal of whether arbitration is required. The law will benefit plaintiff’s attorneys as it will likely increase civil litigation and lead to more lengthy, time-consuming trials.

ASBESTOS LITIGATION

Los Angeles asbestos lawsuit filings have increased 9.8% through July 30, 2023, and the city is the seventh most popular jurisdiction in the country for asbestos claims.

In July, a family of a 45-year-old man who died of mesothelioma was awarded $107 million, including $75 million in punitive damages. The eye-popping verdict came about after the plaintiff’s counsel made several inflammatory comments during closing arguments. In response, the defendant twice asked for a mistrial, which the court denied.

Among the statements according to defendant’s motions, plaintiffs’ lawyers stated, “the punitive damages are substitute for jail, suggesting a crime has been committed, suggesting that making an example of Union Carbide will send a message to other companies – Monsantos [sic], Exxons [sic], Philip Morrises [sic]; evoking images of Roundup litigation and verdicts, oil spills, environmental disasters, and big tobacco litigation,” all of which had nothing to do with an asbestos case. The plaintiffs’ lawyer also charged that the company had “poisoned a bunch of people,” according to the motions, and made reference to “the absence of corporate representatives at trial, unfairly implying that Union Carbide was not showing proper respect for the trial, decedent or Plaintiffs.”

Talc Litigation Update

In November of this year, Los Angeles County added fuel to the state’s asbestos litigation landscape by filing a first-of-its-kind lawsuit on behalf of its residents against Johnson & Johnson. In doing so, the county joined the nationwide wave of lawsuits alleging a connection between the company’s talc-related products, purportedly containing asbestos, and cancer. The complaint argues that J&J continued to sell its talc- containing products to county residents despite alleged awareness of potential health risks. To support this contention, the county extensively relies on a dated 1971 study linking talc and cancer, which apparently put J&J on notice in the mid-1970s of health risks associated with its products. The county additionally capitalized off J&J’s occasional consideration of replacing talc in its products and discontinuing their sale.

The outcome of this lawsuit in the Los Angeles Superior Court remains to be seen. Nevertheless, the county’s decision to engage in the talc-asbestos lawsuits against J&J may propel even more plaintiffs to file claims against the company, contributing to the mounting asbestos litigation in Los Angeles.

Case to Watch

The California Supreme Court is reviewing a lower court’s decision to hold a company liable for “take-home-exposure” after a plaintiff alleged that he was exposed to asbestos when he visited his brother after he came home from work where asbestos was present. At trial, the plaintiff was awarded $2.69 million.

In 2016, the California Supreme Court held that employers and premises owners had a “duty to take reasonable care to prevent secondary (take-home) asbestos exposure to members of a worker’s household.” Now, the Court will decide whether that duty extends to individuals that are not a part of the same household. Should the Court adopt this expansive approach to liability, there would be no logical end.

CALIFORNIA LEADS THE CHARGE BEHIND ENVIRONMENTAL LITIGATION

Climate Change Litigation

California Attorney General Rob Bonta has joined efforts to pin costs associated with global climate change on the oil and gas industry. In his 135-page complaint filed in September, he alleges that the state has incurred substantial financial burdens in combatting extreme weather, droughts, rising sea-levels and other climate-related events that are “destroying people’s lives and livelihoods,” and that the industry should pay these costs because they allegedly created a public nuisance and engaged in misleading marketing.

This lawsuit is in addition to other litigation filed by localities across the state that continues to work its way through the courts.

Piecemeal litigation in state courts is an inappropriate and ineffective way to tackle climate change, a matter of national and global significance deserving of a coordinated international response.

Greenwashing Litigation

An effort is underway in California to attack companies that tout their environmental sustainability efforts with lawsuits.

In July, a court dismissed, for the second time, a proposed class action alleging that Coca-Cola and two other bottled water manufacturers misrepresent their plastic bottles as “100% recyclable.” The plaintiff argued that this phrase misleads consumers into thinking that recyclability is a guarantee, when realistically, consumers may dispose of the bottles in a manner that leads many of them to end up in a landfill or burned.

Another class action, filed in May, alleges that Delta Airlines misleads consumers by calling itself the “first carbon neutral” airline. Plaintiffs claim that Delta’s participation in the carbon offset market does not make it carbon neutral, and that the airline continues to release carbon into the atmosphere while benefiting from an environmentally friendly image.

BATTLE OVER CLASSIFICATION OF WORKERS

A.B. 5 & Prop-22

A.B. 5, enacted in 2019, codified the California Supreme Court’s decision that introduced the “ABC” test to distinguish between employees and independent contractors in worker-classification disputes. This test presumes a worker is an employee, with independent contractor status attainable only under narrow conditions. Certain industries within the state have disproportionately felt the impact of this law.

In May, the California Trucking Association challenged the constitutionality of A.B. 5 after a second attempt at blocking its enforcement through a preliminary injunction a few months prior. Among other allegations, the third amended complaint addressed the law’s potential violation of the Equal Protection Clause by exempting truck drivers in construction- related services, while forcing other truck drivers to classify as employees. Subsequently, a trade association of independent owner-operators of trucking companies joined the suit in June, arguing that A.B. 5 deters its members from conducting business in the state by forcing them to “fundamentally change the way they operate at a significant cost.” The case is currently pending in the U.S. District Court for the Southern District of California.

The unfavorable impacts of A.B. 5 also have been addressed in another context, namely, the gig economy. In November 2020, California voters approved Prop-22, which exempted gig economy companies, including app-based ride-share and delivery services, from A.B. 5. and allowed them to classify workers as independent contractors. In lieu of traditional employee benefits, Prop-22 guaranteed that gig economy workers received alternative benefits that were more suited to the nature of their roles.

Despite the glimmer of hope brought about by Prop-22, a group of plaintiffs sought to declare it unconstitutional.

In August 2021, the plaintiffs initially succeeded in their endeavor when a California trial court struck the law down for encroaching on the legislature’s “plenary” authority to pass workers’ compensation laws. This past March, however, a California appellate panel revived the proposition, finding that authority over workers’ compensation legislation is granted to both the legislature and voters under the state constitution. Unsatisfied with this turn of events, the plaintiffs petitioned the California Supreme Court, which accepted review of the matter in June and has yet to issue its decision.

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