Uber, Postmates Get Appeal Win in Worker Classification Case (2)

Uber Technologies Inc. won reinstatement of its federal court claim that California’s worker classification law unfairly disfavors app-based ride hail and delivery services.

A three-judge panel of the US Court of Appeals for the Ninth Circuit on Friday reversed a lower court ruling rejecting Uber and Postmates’ arguments that California was targeting specific companies “like a heat-seeking missile” as Uber’s counsel told the court during July oral arguments.

“Plaintiffs plausibly allege that the primary impetus for the enactment of A.B. 5 was the disfavor with which the architect of the legislation viewed Uber, Postmates, and similar gig-based business models,” Judge Johnnie Rawlinson wrote for the appellate court.

Postmates, Uber, and driver Lydia Olson “plausibly alleged that their exclusion from the wide-ranging exemptions, including for comparable app-based gig companies, could be attributed to animus rather than reason. The district court therefore erred by dismissing Plaintiffs’ equal protection claim,” the court said.

Uber and Postmates sought reversal of Judge Dolly Gee’s refusal to block California from implementing laws that codified a California Supreme Court decision. The ruling known as Dynamex established a three-factor “ABC test” to determine whether an employer properly classified a worker as an independent contractor rather than an employee for purposes of state wage orders.

The unanimous three-judge panel remanded the case for reconsideration of the injunction request in light of later-filed pleadings. But it affirmed dismissal of the plaintiffs’ due process claims.

Joining in the opinion were judges Danielle J. Forrest and Morrison C. England Jr., a senior judge in the US District Court for the Eastern District of California sitting by assignment.

The “ruling itself is important because it keeps Uber et al’s case alive in federal court,” Samantha Prince, assistant law professor at Penn State Dickinson Law, said in an email. The Ninth Circuit agreed that AB 5 didn’t violate the contracts clause and due process but remanded the consideration of the equal protection clause. “This is important because now the case for a preliminary injunction continues,” Prince said.

‘Great Week’

The ruling is the second this week about worker classification in California. The California Court of Appeal, in the first appellate ruling on the voter-approved Proposition 22 exempting gig workers from AB 5, gave both sides something to praise while setting up a possible appeal.

Representatives for those who oppose Prop. 22 haven’t confirmed whether a high court petition will be filed. Tia Orr, Service Employees International Union California executive director, said in a statement the union and drivers challenging the initiative are “considering all - including seeking review from the Supreme Court.”

“It’s been a great week for gig workers in California,” Uber said in an emailed statement Friday. “Just a few days after Prop 22 was upheld, the Ninth Circuit has agreed that AB5 unfairly targeted platforms like Uber, out of ‘animus rather than reason’. This is yet another signal that efforts to take away drivers’ independence and flexibility will ultimately fail—because it’s simply not what drivers want.”

The issue affects thousands of gig workers who work as independent contractors in positions that offer flexibility and lack employer-paid protections such as worker’s compensation and unemployment benefits. The ruling would affect companies and workers in nine states in the Ninth Circuit and most likely will be appealed to the US Supreme Court. The parties also could seek en banc review before the appeals court.

Theane Evangelis, the Gibson, Dunn & Crutcher LLP partner who argued the case, in a statement said the companies “look forward to pursuing our claim further in the district court.”

California, Other Reactions

California Attorney General Rob Bonta (D) in a statement said the office is “gratified that the court affirmed the dismissal of most of the claims. We are reviewing the decision and assessing next steps.”

Lorena Gonzalez Fletcher, the now California Labor Federation executive secretary-treasurer who authored AB 5 as an assemblymember, in an emailed statement Friday said the decision “disrespects the legislative process and it disrespects the thousands of workers—construction workers, janitors, truck drivers, domestic workers, healthcare workers and rideshare drivers—who testified in support of these basic protections.”

Stacey Leyton, an Altshuler Berzon LLP partner who represents the unions that filed briefs supporting the law, said the decision allowing the equal protection claim to go forward “is contrary to decades of equal protection precedent, and fundamentally threatens the authority of legislatures to address abuses of workers in particular industries.”

California contends that nothing in the law, or a state court injunction, prevents Uber and Postmates from offering workers the flexibility and autonomy that Olson and Postmates delivery person Miguel Perez desire while still treating them as employees. Postmates recently merged with Uber Eats.

California in 2019 enacted legislation (AB 5) to codify Dynamex. Lawmakers amended that law the following year with legislation (AB 2257) to add jobs including photographers, appraisers, and home inspectors to those positions excluded from the designation of presumed employees under the law.

“The plausibility of Plaintiffs’ allegations is strengthened by the piecemeal fashion in which the exemptions were granted, and lends credence to Plaintiffs’ allegations that the exemptions were the result of ‘lobbying’ and ‘backroom dealing’ as opposed to adherence to the stated purpose of the legislation,” the appeals court said.

Uber is represented by Gibson, Dunn & Crutcher LLP. California is represented by the state attorney general’s office.

The case is Olson v. California, 9th Cir., No. 21-55757, 3/22/23.