Uber and Postmates Sue California, Declaring AB5 Unconstitutional

Two major corporations are suing the State of California alleging that a labor rights law that went into effect Jan. 1, 2020 is unconstitutional. Filed in Los Angeles federal court on Dec. 30, 2019, the lawsuit by Uber Technologies and Postmates are striking preemptively against Assembly Bill 5, which was intended to extend greater employment protections to those who work for companies like these and others within the so-called “gig economy.” But the plaintiffs say companies that rely on so-called “gig workers” were unfairly targeted while those in other industries were given more favorable treatment under the law with regard to how they classify workers. In turn, this has threatened the workers’ ability to be flexible. employee misclassification attorney Los Angeles

As our Los Angeles employee misclassification attorneys can explain, AB5 has been the subject of intense and bitter dispute, with drivers, food couriers and other workers caught up in the middle. These workers derive their income by accepting “jobs” through these companies’ smartphone and computer apps. Plaintiffs allege the law arbitrarily exempted various types of workers, including commercial fisherman, grant writers, travel agents, direct salespeople and construction truck drivers.

Written as a means of codifying the California Supreme Court’s 2018 ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (i.e., “the Dynamex ruling).

The law doesn’t solely affect gig workers, though. A group representing freelance journalists have also filed a lawsuit against the state, arguing the statute is an imposition on free speech and the news media because it expressly caps the number of articles a freelance reporter can pen before he/she must be labeled as an employee. Journalism is increasingly a freelance profession, with mobile journalists working from virtually anywhere in the country. AB5 may discourage out-of-state companies from hiring freelance reporters in California.

The ire of the trucking industry too has been raised, with drivers and truck company owners arguing in yet another lawsuit over AB5 that the law makes it impractical if not impossible to use “contractors” for services that require interstate travel.

Tech companies like Uber and Lyft have a lot to lose, given that AB5 could force them to start paying for benefits like healthcare, overtime and workers’ compensation to hoards of drivers. The CEO of Uber was quoted as saying costs would rise 20 percent if it had to classify all its drivers as employees. That’s why Uber, Lyft and DoorDash have so far pledged a combined $110 million to fight the law with a November 2020 ballot initiative that would overturn it.

As of right now, according to the California Employment Development Department, workers are to be considered employees unless and until they are proven otherwise.

Uber’s lawsuit isn’t altogether shocking, but our misclassification attorneys do find it a bit curious, given the repeated insistence by Uber representatives that AB5 isn’t applicable to their drivers anyway.  Their position is (or at least, was) that drivers are performing work that is outside the usual course of business for the company because it isn’t a transportation firm but rather a technology business. That argument has worked with regulators in Vermont who passed a similar law three years ago. However, it didn’t fly with a California judge, who called it “fatally flawed.” (That lawsuit settled last year for $20 million, but didn’t compel the company to start paying drivers like employees.)

Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 714-937-2020.

Additional Resources:

Now the Courts Will Decide Whether Uber Drivers Are Employees, Jan. 3, 2020, By Aarian Marshall, Wired.com

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