Uber, Postmates Seek Appeal in Gig-Worker Contractor Fight (1)

Uber Technologies Inc. and Postmates Inc. asked the Ninth Circuit to review a district court’s refusal to shield their drivers from California’s worker-classification law.

The on-demand ride-sharing and food-delivery companies, whose operations rely on independent contractors, moved Tuesday to appeal an order denying their request for a preliminary injunction against the hotly contested California Assembly Bill 5, which went into effect Jan. 1. Gig-economy companies believe A.B. 5 will force them to reclassify their drivers as employees, and have devoted significant resources to changing the law.

The business model of gig companies relies on contractors, as opposed to employees who are entitled to benefits such as overtime, minimum wage, and workers’ compensation. Companies have estimated that costs would rise 20% to 40% if they were forced to reclassify.

Uber and Postmates had hoped to temporarily delay enforcement of the law against them until the court had fully considered their constitutional challenges. They say A.B. 5 unfairly targets their business models and threatens gig-workers’ flexibility.

But the public interest weighs “in favor of permitting the state to enforce this legislation,” Judge Dolly M. Gee of the U.S. District Court for the Central District of California found Feb. 10. The court acknowledged that enforcement might cause “irreparable harm” to the companies.

California Gov. Gavin Newsom (D) signed A.B. 5 in September 2019. The law codifies a three-part test, known as the ABC test, for determining whether a worker is an employee or an independent contractor. The test creates a steep barrier for the gig economy because one of the criteria requires workers to prove that a contractor operates outside the course of usual business for a company. Uber has argued, however, that as a technology platform, it should be able to classify its drivers as contractors.

The state has argued that it has the prerogative to protect workers from exploitation. Several groups, including freelance journalists and major trucking associations, have challenged A.B. 5. Some states have considered proposals to adopt measures similar to the ABC test.

Gibson, Dunn and Crutcher LLP represents Uber and Postmates. The California Department of Justice represents the state. The attorneys didn’t respond to requests for comment.

The case is Olson v. California, C.D. Cal., No. 19-cv-10956, 3/10/20