Federal Court Denies Uber Request to Stop AB5

In a blow to the gig economy, a Los Angeles federal court has ruled that Uber, Postmates and two individual plaintiffs are unlikely to succeed on their constitutional challenges to AB5. Olson v. State of California (Olson). 

While noting the potential harm Uber and the other plaintiffs face from AB5’s rigid “ABC” standard for classifying independent contractors, the judge found more important the state’s legitimate “interest in protecting exploited workers to address the erosion of the middle class and income equality” and in “preventing misclassification of millions of workers.”

The court also rejected the Uber plaintiffs’ argument that gig economy workers should be exempted from AB5 as are other specifically named occupations and industries. The judge agreed with the state that AB5 legitimately distinguishes these other working relationships as requiring “business organization, skill, self-direction, self-pricing, shorter or less frequent work terms, a distinct location, specific type of work, and other hallmarks of independent status.” Even if these AB5 exemptions resulted from various industry lobbying efforts, the court found such exceptions do not mean the legislature unconstitutionally chose to harm others.

While the plaintiffs might still win their Olson case at a full trial several months from now (note: the State of California is asking the judge to dismiss the suit), Uber is reportedly moving to give their drivers even greater independence to forestall state challenges. See, e.g., AB 5 is already changing how Uber works for California drivers and riders, Los Angeles Times, February 3, 2020.

Independent contractor classification remains in the forefront of California employment law issues. With heavy penalties and even criminal prosecution at stake, a business’s prompt and thorough examination of its contractor relationships with the aid of knowledgeable legal counsel is a smart move.

See also:

• Employed or Independent? California Offers AB5 Answers (February 2020).
• Bullet Dodging Part 6, Real Estate Agent Exemptions from Stringent Limits on Independent Contractor Status (November, 2019).
• Bullet Dodging Part 5, The Referral Agency Exception to California’s Strict Independent Contractor Definition (November, 2019).
• Bullet Dodging Part 4, Building Subcontractors’ Exemption from the Strict New Limits on Who is “Independent” (October, 2019).
• Bullet Dodging Part 3, California’s “Professional Services” Exemption to Strict Independent Contractor Definition Licensed Beauticians Among the Eligible (October, 2019).
• Bullet Dodging Part 2, California’s “Business-to-Business” Exception to Strict Independent Contractor Definition (October, 2019).
• Dodging the Bullet, The Industries and Professions Not Subject to California’s New Independent Contractor Restrictions (October, 2019).

For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin

Tim Bowles

February 21, 2020