App-Based Drivers' Battle Against AB5 Reignited: Uber and Postmates Return to the Fray

3-judge appeals panel cites statements by AB5 author in kicking case back to lower court

Uber and Postmates have seen a lower court loss get overturned at the appellate level in a battle over AB5 (Photo: Jim Allen)

AB5 Lawsuit Revived

A lawsuit against AB5, filed by Uber, Postmates, and two of their gig drivers, which failed in a lower federal court in California in 2020, has been partially revived on appeal. The main reason for the reversal appears to be the statements made by AB5’s key sponsor, Lorena Gonzalez, who is now the chief officer of the California Labor Federation.

Appeals Court Supports Ride-hailing Firms

The 9th U.S. Circuit Court of Appeals partially reversed a prior ruling, granting Uber, Lyft, and Postmates significant victories in their fight against the implementation of AB5 for app-based drivers. The case will be remanded to the United States District Court for the Central District of California. The ride-hailing companies argued that AB5 targeted their platforms unfairly, violating their due process rights, state contract law, and the equal protection clause of the Constitution. Despite the fact that the lower court rejected these arguments, the appellate court upheld the claim for equal protection, reversing the lower court's decision.

Exemptions and Gonzalez's Role

A central argument of Uber and Postmates is the long list of exemptions for specified industries in AB5. The appellate court noted that Gonzalez had expressed openness to changes in the bill, including exemptions for musicians, but not for app-based ride-hailing and delivery companies. It also agreed with the plaintiffs' claim that Gonzalez's statements "disparaged" the app-based industry.

Similar Business Models

The court found that other app-based workers, such as those with TaskRabbit or Wag!, received exemptions, even though their business models are nearly identical to Uber and Postmates. The court argued that there is no indication that workers in exempted categories are less susceptible to being exploited by being misclassified as independent contractors.

Gonzalez's Response

Gonzalez, who is frequently outspoken on Twitter, was uncharacteristically silent about the appellate court decision on Friday. The only tweet she sent that day that may have been prompted by the decision was her assertion that "our system is broken." The tweet contained no additional information regarding "our system" or what was "broken."

Trucking Industry's Concerns

Greg Feary, a partner at trucking-focused law firm Scopelitis, mentioned that the appellate court's precedent could become a concern for the trucking industry if the California Trucking Association's (CTA) case against AB5 returns to that level. The initial injunction against AB5 from a lower court was overturned by the 9th Circuit in April 2021, and with the Supreme Court not reviewing the decision, AB5 was implemented in California's trucking industry. The CTA case has since returned to the district court, where plaintiffs have filed their initial comments.

Targeting App-Based Platforms and Trucking

It is widely believed that Gonzalez targeted app-based platforms and the trucking industry with AB5. However, no trucking-related case against AB5 has cited any statements made by Gonzalez. Instead, the initial CTA case focuses on interstate commerce clause and state vs. federal jurisdiction issues. Feary believes that the ongoing CTA case could be remanded to the 9th Circuit for a closer examination of Gonzalez's statements and industry exemptions.

Challenges of the ABC Test

The ABC test, which became part of legal precedents and then AB5, has been particularly challenging for trucking and app-based drivers due to the B prong. To be classified as an employee, a worker must "perform work that is outside the usual course of the hiring entity's business," according to this criterion. This provision can affect truck drivers employed by a trucking company as well as those who transport people or food for a business whose primary focus is on these activities.

Differences in Uber/Postmates and CTA Cases

The absence of a preliminary injunction in the Uber/Postmates case is a significant difference from the CTA case. Although the case was sent back to the district court, the appellate court did not order a halt to AB5 implementation for app-based drivers while the Uber/Postmates case is reheard. This is despite the fact that Prop 22 may render this step technically moot, even if not found legally so.

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