Gig economy giants Uber and Postmates failed to convince U.S. District Judge Dolly Gee that she should grant an injunction to prevent enforcement of AB-5. While seeking to halt enforcement of AB-5, the companies concurrently contend that the law does not apply to their drivers. In case you’re just tuning in, AB-5 creates a legal presumption that all workers in California should be employees unless they pass a stringent ABC test or fall into a detailed exemption, which you can read more about here.
You may be familiar with the AB-5 ABC test, which provides that to establish independent contractor status in California beginning on January 1, 2020, employers must satisfy all three of the following prongs:
A) The company must not be able to control or direct what the worker does, either by contract or in actual practice;
B) The worker must perform tasks outside of the hiring entity’s usual course of business; and
C) The worker must be engaged in an independently established trade, occupation or business.
In the lawsuit, Uber and Postmates contend their delivery drivers meet the ABC test and are properly classified as independent contractors, because the work performed is outside the usual course of their business.
But Uber and Postmates have not yet been forced to defend their position in court, despite a tweet by Assemblymember Lorena Gonzalez asking local City Attorney’s office to actively enforce AB-5 against Uber specifically. It remains to be seen whether cases will continue to settle through use of mandatory arbitration agreements, which is another hot topic. Or, whether gig companies will be forced to defend their position, given the court’s refusal to halt enforcement of AB-5. The companies’ request for an injunction claimed AB-5 was unconstitutional because it violated the equal protection and due process clauses of the Fourteenth Amendment, among other clauses. But, today’s order found that AB-5 served a public interest and did not unlawfully target gig economy workers in violation of state or federal law.
Indeed, based off plain language of the bill and the many, many phone calls I have received since the law passed last fall, AB-5’s statutory language is broad and encompasses many more industries than just gig workers. For companies still assessing their worker status or figuring out potential classification options, we have had many discussions surrounding:
- The Uber approach and whether the “usual course of business” can be creatively defined.
- The idea of utilizing a staffing agency as an employer (note joint employment concerns).
- Whether a professional service exemption applies.
- Whether a business to business exemption could apply.
- Whether to pretend you’ve never heard of AB-5 (not recommended).
Any member of our team is happy to discuss the myriad of options and risks associated with AB-5, now that its enforcement has cleared one more constitutional hurdle.