A lawsuit brought against the controversial labor law AB5 by Uber, Postmates and two of their gig drivers has partially succeeded on appeal.
The law was passed by the state of California in 2019 and aimed to make it more difficult for companies to classify workers as independent contractors as opposed to employees, a recent FreightWaves report said. Uber and Postmates challenged the law, claiming that it violated their due process rights, violated state contract law and singled out app-based platforms.
The case was initially rejected by a lower federal court in California in 2020, but the 9th U.S. Circuit Court of Appeals has now partially reversed that decision. The court found that AB5 violated the equal protection clause of the Constitution, agreeing with the argument that the law singled out app-based workers for special treatment. The court cited the ABC test, which was a major component of the law, and which was introduced by Lorena Gonzalez, the bill's sponsor. Gonzalez has made several disparaging statements about app-based platforms, and the court found that this evidence supported the plaintiffs' allegations that the law was politically motivated.
“I think [the Uber/Postmates appeal decision] might take on an additional argument in front of the 9th Circuit,” Greg Feary, a partner with Scopelitis, a trucking-focused law firm, said in reference to the possibility that the ongoing California Trucking Association (CTA) case may return there again. “People will try to take another look at her statements from the beginning to where we are today and look at the whole issue of all these carve-outs and why certain industries weren’t carved out.”
The decision is a major victory for Uber and Postmates, which argued that the ABC test was unfairly biased toward finding that a worker should be classified as an employee rather than an independent contractor. The companies also argued that AB5 singled out app-based platforms, while other businesses were granted exemptions.
The ruling is also a blow to the California Labor Federation, of which Gonzalez is now the chief officer. Gonzalez was a state assemblywoman when AB5 was passed, and the court cited her remarks as evidence that the law was politically motivated. The court found the business models for other organizations that received exemptions—such as dog walkers and Task Rabbit workers—were nearly identical to Uber and Postmates' business models.
The decision is likely to have implications for other industries affected by AB5, including the trucking industry. The CTA has previously challenged the law, arguing that it interferes with interstate commerce. An earlier injunction against AB5 was overturned by the 9th Circuit in April 2021, and AB5 was implemented in the state's trucking industry. But the CTA case has gone back to the district court, and the precedent laid down by the appellate court in the Uber and Postmates case may become an issue in that case as well.
The decision also has implications for Prop 22, a successful referendum backed by Uber and Lyft that blocked AB5 from being implemented against app-based drivers. A state appellate court reversed a lower court decision on Prop 22 on March 13, holding that the referendum was constitutional.