Labor advocates got a major win last month when a California Superior Court judge ruled Proposition 22—the controversial ballot initiative that allowed ride share companies to keep classifying drivers as independent contractors rather than employees—was in fact unconstitutional.
Prop 22 was passed in November of 2020 in response to California Assembly Bill 5, which gave gig workers wage and benefit protections. Ride-share companies like Uber, Lyft, and DoorDash built their business model on gig workers. And they spent hundreds of millions of dollars to defend it, lobbying in support of Prop 22 and making it the most expensive ballot measure in California's history.
The Service Employees International Union sued the state in January to overturn the proposition, and on Aug. 20, an Alameda County Superior Court Judge Frank Roesche found Prop 22 violated the state's constitution, rendering it unenforceable. Uber and other ride-share companies have already announced their intent to appeal the ruling, and the case is expected to make its way up to the California Supreme Court.
dot.LA spoke with Catherine Fisk, Berkeley Law professor who wrote an amicus brief in favor of the drivers, about what the ruling means for the future of Prop 22, ride-share companies, drivers and the gig economy at large.
This interview has been condensed for brevity and clarity.
The Superior Court found that two sections of Prop 22 were unconstitutional, both of which you outlined in the amicus brief you and others wrote in favor of the drivers. Which parts of the proposition violated the state constitution?
One argument was that Prop 22 unconstitutionally limits the power of the legislature to provide for a complete and adequate system of workers' compensation. Workers' comp is a program that now every state has that provides a system of no-fault compensation for workers who are injured or become ill in the course of their employment. So legislatures everywhere created systems of workers compensation. Business groups, at that time, didn't want to pay the cost of compensating workers for their injuries and challenged these workers' comp systems often in court, and in many cases found judges to invalidate the workers' comp programs in whole or in part. So in California, the people amended the constitution to require that the legislature have plenary—that is complete power—to provide for a system of workers' compensation. This all happened over a century ago. So in the case of Prop 22, the court found that by carving out app-based drivers from the protections of workers' comp, it unconstitutionally limited the power of the legislature to provide for a complete and adequate system of workers' comp. Essentially, the transportation companies were trying to redo what businesses had done a century ago to eliminate workers' comp for some or all employees. And the court said no, because the California Constitution had been amended in 1918, specifically to prevent that kind of move by business.
Berkeley Law professor Catherine Fisk
A second argument was that Prop 22 violates another provision of the California Constitution, which requires that any ballot initiative, like any other piece of legislation, must address only a single subject. The purpose of the single subject rule is to prevent voters from being confused or misled about what a ballot initiative would do. In the case of Prop 22, the particular confusion that the court focused on was that Prop 22 prohibits the legislature from enacting a law that would authorize drivers to negotiate collectively through a representative. This provision of Prop 22, which was buried in the fine print, was not described in the advertising in favor of the proposition. It wasn't even described in the voter information pamphlet, or the summary that appeared on the ballot.
Right, I don't remember hearing about that part of Prop 22 at all in 2020.
You had to read every single word of Prop 22. But even if you had read every single word, you wouldn't have understood what this provision would do. Because in order to understand it, you have to understand federal labor law, federal antitrust law, and their relationship to each other. Here's why. The real significance of that provision was that if the workers unionized it would enable the companies to sue the worker union for being in violation of federal antitrust law. There are 50 lawyers in the country who know enough about antitrust law, and enough about labor law to understand that that's what was going on.
So because this was hidden in the fine print and not described anywhere and had nothing to do with what the what Prop 22 said it was about—which was eliminating minimum standards for drivers—this, the court said violated the single subject rule, because it would confuse voters, you could read all the materials and still not understand what you were voting on. So that was another argument that the court found for why Prop 22 was unconstitutional.
Assuming this goes all the way to the state Supreme Court, the Superior Court decision is upheld, what might that mean for the ride-share companies and drivers?
It means Prop 22 will not be in effect, which means that the legislation that Prop 22 was designed to overrule [AB5] will go into effect, which means that drivers of transportation network companies will be entitled to be paid the minimum wage; they will be entitled to be paid overtime if they work more than 40 hours a week; they'll be entitled to protection against discrimination on the basis of race, religion, gender, etc; they'll be entitled to workers compensation benefits if they're injured. It will improve minimum standards for drivers.
And if the decision is ultimately overturned by the state supreme court, what legal options remain, if any, to get those protections for gig workers?
None. Well, to be clear, Prop 22 did say that the legislature could amend it by a seven-eighths vote. In other words, seven-eighths of the entire legislature would have to vote to change any provision of Prop 22. Why seven-eights? Because the proponents of the Prop 22 know that Democrats have a two-thirds majority of the legislature, and so they wanted to make the majority so great that the legislature could not amend it. Federal law can preempt state law or it can supersede state law. So Congress could provide that drivers are entitled to the minimum wage. Congress could provide that they're entitled to unemployment benefits, if they are laid off. Congress could create a compensation system for injured drivers. But it would have to go through Congress. And it's very hard to get anything through Congress.
Right, so high stakes.
Very high stakes.
What are the implications of this ruling then for the gig economy at large?
The gig economy, so called, especially for low-skill work like driving has been based on a low-wage model. Drivers get paid very little. Many are making way less than the minimum wage. They have no protection if they're injured in the scope of employment. And there's no reason that driving for a living has to be a low-wage job. In the 1950s, when truck driving was unionized, driving was a middle-class job.
So really what this fight is about is how to divide the profits of the app-based driving model. Should more of the money that's being made in this work, go to the workers? Or should more go to the investors? I've received a dozen phone calls or emails since the decision came down by people saying they represent investors in this industry who want to talk to me about what it means—I decline all those calls, by the way—because investors are making a bunch of money in this sector, and they want to know whether they're going to keep making a bunch of money, or whether it's going to be less profitable for investors, and more profitable for workers. That's what's at stake here.
Is there a model that could work?
When taxi cabs came into existence, everybody thought, "Oh, that's genius. Imagine being able to stand on the sidewalk and wave my arm at a yellow car, and have it stop for me and take me where I want to go." The real question is, are we going to regulate this innovative business to ensure that drivers are paid decently and have protection in the case of injury. We figured out how to have taxis and regulate them to protect both drivers and the public; cities all had taxi cab commissions that did exactly that, and they regulated fares. We could have the same model for app-based driving. The real question is, are we going to regulate this innovative business to ensure that drivers are paid decently and have protection in the case of injury. It will probably be more expensive. But when everybody said, "Wow, Uber is half the cost of a taxi," nobody thought, "and why is that?"
The thing about an Uber is that companies figured out that you could have a giant fleet of drivers on the road at all times, with zero fixed cost to the company. The drivers pay for the car; the driver pays their own time; the driver pays gas; the driver pays insurance; the drivers pay if they become injured; and the city picks up the cost of the road maintenance. So the company shifted all the risk and all the fixed costs of the business to the labor force, which was genius from the investing standpoint, but terrible for drivers.
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In the fall of 2017, Lou Cooperhouse took the stage at the Hawaii Agricultural Foundation conference to talk about what he saw as the trend that would lead to the total transformation of our food supply: alternative proteins.
At the time, Cooperhouse — whose long career in food innovation includes founding and running Rutgers Food Innovation Center, an incubator for startups — was working with multiple companies making plant-based products. (Impossible Foods Inc., of Impossible Burger fame, was a client.) But the real transformative technology, in his view, was the use of cell culturing to make meat from animal cells — products that would have the look, feel, taste and nutritional content of real meat, because that's exactly what they are.
The first cell-cultured hamburger — a five-ounce patty that cost more than $300,000 to produce — was made in 2013, and a slew of beef and poultry-based products were under development. "I said to myself, that's amazing technology," Cooperhouse said, "but the real home run, the holy grail, would be seafood."
Chris Somogyi, an entrepreneur in the audience that day, agreed. Before the year was out, Somogyi and Cooperhouse had teamed up with Chris Dammann to launch BlueNalu, a seafood-focused cell culture company. Since its founding in 2017, the San Diego-based company has become the first to create stable cell lines from a variety of fin fish. (Both Somogyi and Dammann have since left the company.)
The cell-based protein industry is booming. Dozens of startups trying to grow food in labs have formed in the United States in recent years, and they raised more money in the first quarter of 2020 — some $189 million — than in all previous years combined, according to the Good Food Institute, a nonprofit that advocates for alternative meats.
BlueNalu President + CEO Lou Cooperhouse
So far, only one company has made it to market: the U.S.-based start-up Eat Just received regulatory approval to sell it's cell-cultured chicken at a restaurant in Singapore in late 2020. One of the major obstacles for many companies has been cost, and most are still working to bring down the price of the raw materials, scale-up production and gain regulatory approval. A few more are expected to hit the market this year. By one estimate, as much as 35% of meat will be cultured by 2040, buoyed by efforts to reduce carbon emissions, antibiotic use and the risk of disease.
But to Cooperhouse, seafood, more than any other industry, is in need of a transformation: Overfishing has pushed fisheries around the globe to the brink of collapse. Ocean acidification, heat waves, plastic pollution, and more threaten the stocks that are left. Research suggests that as many as 60% of the marine species humans fish are at a high risk for extinction in the coming years. Yet demand continues to rise since at least the mid-20th century. According to the United Nations's Food and Agriculture Organization, the rise in global fish consumption since 1961 has outpaced both population growth and increases in production of other meat products.
"Our global supply gap is only getting worse, our supply is increasingly compromised with mercury and environmental pollutants and plastics, and we just can't feed the world," Cooperhouse said. But in cell culture technology, he saw an opportunity to create a stable supply of one of the world's most sought-after protein sources, easing pressure on our oceans and feeding the world at the same time.
In January, the 40-person company announced it had raised $60 million in debt financing led by Rage Capital, bringing its total fundraising up to more than $84 million. BlueNalu's other significant investors include New Crop Capital, Lewis & Clark Agrifood, Siddhi Capital, and Rich Products Corp. The latest round of funding is expected to see the company through the next two phases of its development, according to Cooperhouse: FDA approval, and the initial launch of its products in select restaurants in San Diego.
It's too soon to say which restaurants those will be.
After market testing in restaurants, BlueNalu plans to scale up production with the construction of more factories, creating jobs and providing consumers with a third option to farmed or wild caught fish.
Already, the company is building out its facility in San Diego. By the end of the year, it will be capable of producing several hundred pounds of cell-cultured fish per week.
The Good Food Institute, which has called on the Biden administration to allocate some $2 billion toward research and research facilities for alternative proteins, believes that the production of plant-based and cell-cultured meats "will spark a renaissance in American manufacturing."
Critics of cell-cultured meat worry that the product could put farmers and fishermen out of work, but BlueNalu claims that it is carefully choosing its products with these issues in mind. Its first product to market will be mahi-mahi, a nod to the company's Hawaiian roots, and the most practical choice for a company that's trying not to compete with U.S. fisheries.
"We're specifically targeting seafood that are typically imported, that are high in mercury or other contaminants, or they can't be farm-raised at all," Cooperhouse said. A cell-cultured Bluefin tuna, a species that is both overfished and high in mercury, will follow. "The bottom line is there's a fundamental global supply chain gap. If we don't find another solution, we will be out of fish or it will be so high priced it will be unattainable."
The National Fisheries Institute, a nonprofit focused on seafood sustainability, is supportive of cell-cultured seafood as part of the solution. "As the global demand for seafood increases, so will the need for innovative solutions like cell-cultured products," an NFI spokesperson said by email.
The final challenge for the first cell-based fish company is marketing. To prepare for direct-to-consumer sales, BlueNalu worked with the Alliance for Meat, Poultry and Seafood and the NFI to agree on a term that would allow the public to distinguish between wild-caught, farmed and fish grown from fish cells: cell-cultured. The term can be used more broadly to distinguish proteins from animals, and those made from animal cells.
As CEO, Cooperhouse has worked to distance BlueNalu from earlier cell-cultured products presented to the public as meat grown in petri dishes. BlueNalu's facility is a food factory, he says, not a lab.
"We are first and foremost a food company," he said. "BlueNalu is a culinary driven company. We are making great-tasting seafood products with all the sensory benefits, all that you love about seafood, but without the mercury, microplastics or pollutants."
Lead Image by Ian Hurley.