Uber, Postmates Lose Preliminary Injunction in AB 5 Case

Earlier this week, a judge from the Central District Court of California denied a preliminary injunction filed by Uber and Postmates against the implementation of a new California labor law. California Assembly Bill 5 (AB 5), aimed at helping provide benefits to workers within the gig economy, was signed into law last fall with an implementation date of January 1, 2020.

The initial complaint was filed against the State of California on December 30, 2019, just two days before AB 5 was due to be implemented. The plaintiffs are the ride-hailing giant Uber and one of their drivers, Lydia Olson, in addition to the delivery app Postmates and one of their couriers, Miguel Perez. In the complaint, the plaintiffs claim, “AB 5 is an irrational and unconstitutional statute designed to target and stifle workers and companies in the on-demand economy.”

The bill was intended to codify the decision in the case of Dynamex Operations West Inc. v Superior Court of Los Angeles, in which the court ruled in favor of having more stringent criteria for independent contractors. The intent of the ruling, and eventually AB 5, was to ensure employers were providing workers with proper pay and benefits which are required for employees but not independent contractors.

In the Dynamex case, the judge laid out an “ABC” test to determine if a worker was an employee or a contractor. Stating “[t]he hiring entity’s failure to prove any one of these three prerequisites will be sufficient in itself to establish that the worker is an included employee, rather than an excluded independent contractor, for purposes of the wage order.”

The three criteria are as follows:

“(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

However, Uber and Postmates claim their employees do not qualify for the ABC test, stating “that app-based on-demand workers are “independent contractors” under the Fair Labor Standards Act.” The Plaintiffs also cite a letter issued by the Department of Labor to further show how their drivers don’t fit the ABC criteria.

In her report this week, Judge Dolly Gee stated, “The Court does not doubt the sincerity of these individuals’ views, but it cannot second guess the Legislature’s choice to enact a law that seeks to uplift the conditions of the majority of non-exempt low-income workers rather than preserve the status quo for the smaller subset of workers who enjoy independent contractor status.”

Uber and Postmates are not the only companies trying to fight AB 5. A group of drivers and couriers from Lyft, Door Dash, Instacart in addition to Uber and Postmates have started a ballot initiative that they hope would counteract AB5 and allow the workers to remain as contractors.