Judge denies stay on gigwork law

Uber and Postmates were rebuffed Monday by a federal judge who denied their request to temporarily halt enforcement of AB5, California’s new gigwork law, against them.

AB5 makes it harder for companies to claim that workers are independent contractors, rather than employees. Uber and Postmates, as well as many other gigeconomy companies, contend that this would ravage their business models.

“The balance of equities and the public interest weigh in favor of permitting the state to enforce this legislation,” wrote U.S. District Judge

Dolly M. Gee in a 24page ruling on the San Francisco companies’ request for a preliminary injunction. The case, Olson vs. California, was filed Dec. 30 in U.S. District Court in Los Angeles.

The two companies, along with a driver for each of them, sued California in late December, contending that AB5 is “irrational and unconstitutional.” They claim the law unfairly targeted “modern appbased” ride and delivery companies, in part because it exempts many other professions such as doctors, lawyers, engineers and architects.

But, ruling that “there are rational explanations for AB5’s exemptions,” Gee wrote that the plaintiffs were unlikely to prove they had been discriminated against. Uber disagreed. “State legislators ... passed AB5 using a biased and overtly political process that ignored the voices of the workers most affected by the law and granted preferential treatment to an arbitrary group of industries,” the company said. “We are joining a growing group of companies and individuals suing to ensure that all workers are equally protected under the law and can freely choose the way they want to work.”

Postmates said it was disappointed in the decision.

“AB5 is undercutting workers across the economy, and Postmates remains committed to the modernization of worker classification and worker protections and sees our ballot conversation with voters, our legal conversation with drivers, and our continued outreach to all stakeholders as critical pieces to an enduring proworker, proinnovation solution that preserves the flexibility and autonomy of California workers while adding meaningful benefits,” it said in a statement.

Both companies are considering whether to appeal the order.

Gee used some of the companies’ own insistence that they can pass AB5’s stricter employment test to undercut their arguments.

The lawsuit claimed that AB5 deprives Uber and Postmates drivers of their ability to pursue their chosen occupation, and impairs the companies’ contracts with drivers. However, she said, since “Uber and Postmates have explicitly stated that AB5 does not require them to reclassify their drivers as employees,” they cannot at the same time claim they were subject to “forced classification.”

Even if drivers were reclassified as employees, she said, “they potentially could still pursue their line of work, provided that their employers compensate them properly and allow them to have flexible work schedules.”

The companies failed to prove that AB5 “does not serve a significant and legitimate public purpose,” she write.

Uber and Postmates contended that they face a Hobson’s choice. By not classifying workers, they could be subject to litigation and the threat of criminal penalties, while reclassifying would involve costly business restructuring, their suit said.

But the judge wrote that since the companies insist AB5 won’t affect their drivers’ employment status, “any irreparable injury based on a costly business restructuring process and unrecoverable expenditures is speculative.”

Uber is battling AB5 in multiple ways. Uber, Lyft, DoorDash, Postmates and Instacart have pledged $110 million for an initiative that they hope to place on the November 2020 ballot. The proposed measure would keep their drivers and couriers as independent contractors while allowing them to receive some benefits and wage guarantees. Uber has also retooled some ride processes to give its California drivers more independence.

Other lawsuits over AB5 have had differing results so far. Truck drivers won a preliminary injunction last month to temporarily stop enforcement against motor carriers until their case challenging the law is heard in court. But freelance writers and photographers were denied in their request for a temporary restraining order.