Uber/Postmates Driver Loses Court Challenge To California's AB5 Law

Although AB5 remains a nonfactor — for now — in the California trucking industry, the body of legal cases on its implementation continues to grow. And so far, its backers appear to be winning.

The latest decision favoring the backers of AB5 came down last week, when a federal district court judge in California dismissed a constitutional challenge to the law brought by Uber Technologies, Inc. (NYSE:UBER) and two drivers from food delivery service Postmates. Uber announced in July its attention to acquire Postmates.

It is the second court decision in roughly six weeks to go against companies and individuals fighting the imposition of AB5 among delivery drivers. And while AB5 remains walled off from the trucking sector due to a preliminary injunction in place since the beginning of the year, the decisions being handed down now could be setting precedents for what would surely be new legal battles if the protections to trucking under the so-called F4A act are yanked out in an ongoing lawsuit first brought by the California Trucking Association.

AB5 went into effect Jan. 1. It seeks to put into law the provisions of the Dynamex decision from 2018, which sets guidelines in what is known as the ABC test for determining whether a worker who had been considered an independent contractor is actually an employee. There are numerous categories of independent contractors who have had an exemption carved out for them. That list got longer earlier this month when a revision of the law gave exemptions to workers such as freelance writers and translators.

In the Uber/Postmates case, an attempt in February by the plaintiffs to be granted a preliminary injunction against the law failed.

Several grounds for the challenge

The suit by Uber and the drivers challenged the constitutionality of AB5 on several grounds, including equal protection under the laws and due process, in part because of the many exemptions granted to a myriad of categories but not drivers. The plaintiffs in the case charged that AB5 violated several legal protections because it was specifically targeted at drivers, including the truck drivers who so far have been protected from the law.

The dismissal handed down by federal District Court Judge Dolly Gee said many of the exemptions cited by the Uber and the Postmates drivers are not exemptions at all and that the ABC test still applies to the relationship between a subcontractor and the worker, such as that between a construction company and a construction worker (as opposed to the relationship between the contractor and the subcontractor).

There also are jobs that are exempt that require licenses granted by the state. Judge Gee said the transportation jobs at the heart of the lawsuit require "distinctly different training, accreditation and industry-protective considerations than the professional licenses exempted in AB5."

"Plaintiffs do not plausibly allege that there is no rational reason to treat a transportation business license differently from a license to practice medicine or law," Gee wrote.

Gee conceded the list of exemptions might not be perfect, but cited precedence in noting that, as the old adage holds, the perfect is the enemy of the good. She cited an earlier decision that held that a state's legislature, in writing a law, does "need not run the risk of losing an entire remedial scheme simply because it failed, through inadvertence or otherwise, to cover every evil that might conceivably have been attacked." The legislature is given leeway to impose "some admittedly arbitrary line-drawing," she wrote.

While the media coverage of AB5 overwhelmingly has focused on Uber and Lyft, fueled in part by comments made by the legislation's key backers, Gee was not swayed that the law was unconstitutional because it could be seen as singling out a particular class of worker-employer relationship. As Gee wrote, the plaintiffs argued that the legislature's "willingness to consider more than 30 bills that would create carve-outs for some industries but not the gig economy indicates that AB5 is motivated by irrational animus."

But she dismissed the charge, noting that earlier court decisions have "held that a plaintiff cannot prove invidious discrimination simply by alleging that legislators responded to lobbying efforts because … ‘accommodating one interest group is not equivalent to intentionally harming another.'"

Gee also dismissed other charges in the Uber/Postmates lawsuit. There is no "fundamental right" to pursue a profession that would negate "any state-sponsored barriers to entry," she wrote. "AB5 survives … review because it conceivably furthers the state's legitimate interest in preventing misclassification of workers, including those working in the gig economy."

The issue raised by the plaintiffs that the drivers signed contracts classifying them as independent contractors is not the final word, Gee wrote, adding that the plaintiffs "should have foreseen that the labels the parties placed on their relationship" were not necessarily going to be the final word and that they could be reclassified by government action.

The plaintiffs face an Oct. 9 deadline to file an amended complaint.

Benzinga

Benzinga