Uber, Postmates Lose Bid to Temporarily Block AB5

Nancy Grover

Los Angeles, CA (WorkersCompensation.com) – The public interest would not be served by temporarily blocking enforcement of AB 5 for Uber and Postmates, said a California judge. U.S. District Judge Dolly Gee rejected an attempt by the companies and two individuals to stall the measure while they challenge the constitutionality of the law that would reclassify some independent contractors as employees.

“Considering the potential impact to the State’s ability to ensure proper calculation of low income workers’ wages and benefits, protect compliant businesses from unfair competition, and collect tax revenue from employers to administer public benefits programs, the State’s interest in applying AB 5 to Company Plaintiffs and potentially hundreds of thousands of California workers outweighs Plaintiffs’ fear of being made to abide by the law,” Gee wrote in her decision.

Ridesharing and other app-based gig economy organizations say the law will harm their business models by forcing them to pay workers certain benefits, such as workers’ compensation, and health insurance. Some workers have argued against the law as well.

Of the two individual plaintiffs Gee said “Though they assert that they would suffer unrecoverable financial losses and lose customer goodwill, freedom, financial stability, and work satisfaction if Uber and Postmates reclassify them as employees, those harms are speculative so long as the Company Plaintiffs maintain that AB 5 does not apply to them.”

The two companies “have demonstrated a likelihood of irreparable harm based on the threats of enforcement against them by city attorneys and the availability of criminal penalties,” Gee wrote. “But this showing is offset somewhat by the fact that the Company Plaintiffs may still face private enforcement actions under Dynamex, even in the absence of AB 5.”

Both Uber and Postmates said they are reviewing the judge’s decision and considering whether to appeal. Postmates said the ruling was merely procedural, and that it looked forward to pursuing their suit against the law.

The suit was filed against the state of California and argues AB5 violates the U.S. Constitution and unfairly singles out app-based technology platforms. It says the law violates guarantees of equal protection under the federal and state constitutions.

Gee will next hear the suit. But based on comments the judge made, it appears unlikely the companies will be successful. She said it is unlikely the companies will prevail on the merits of their claim.

“AB 5 is rationally related to a legitimate state interest and did not target gig economy companies in violation of Equal Protection,” Gee wrote. “Section 1 of AB 5 sets forth a statement of purpose that describes ‘[t]he misclassification of workers as independent contractors [as] a significant factor in the erosion of the middle class and the rise in income inequality.’ … The Legislature’s stated intent in enacting AB 5 is:

to ensure workers who are currently exploited by being misclassified as independent contractors instead of recognized as employees have the basic rights and protections they deserve under the law, including a minimum wage, workers’ compensation if they are injured on the job, unemployment insurance, paid sick leave, and paid family leave.”

Gees’s ruling is the latest on actions related to AB5. Earlier this month another judge ruled that the law does not apply to independent truck drivers because they are subject to federal statute. Next month a judge is scheduled to consider whether to temporarily block enforcement of the law against freelance writers and photographers. However the bill’s original sponsor has said she intends to change the law as it pertains to freelancers and possibly musicians.

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