A federal appeals court has revived a suit by Uber and Postmates that seeks to block a law that makes them treat workers as employees, not contractors, saying there are indications the legislator behind the law allgedly "singled out" the two companies because of "animus."
The March 17 decision was penned by Circuit Judge Johnnie Rawlinson, with concurrence from Circuit Judge Danielle Forrest and Senior Circuit Judge Morrison England Jr., of the U.S. Court of Appeals for the Ninth Circuit. The decision favored app-based rideshare service Uber and food delivery company Postmates, which are both headquartered in San Francisco, in their dispute with California Attorney General Rob Bonta.
Uber and its subsidiary went to U.S. District Court in 2021 to prevent Bonta from enforcing a state law, known as AB 5. The law would force certain gig economy companies, such as Uber and Postmates, to recognize their drivers and other personnel as direct employees. However, many other job fields were exempted from the law.
Uber acquired Postmates in 2020.
The chief backer of the 2019 law was Assemblywoman Lorena Gonzalez, a Democrat from San Diego, who left the General Assembly in 2022 to assume a leadership post with the AFL-CIO labor union.
Gig companies have said this measure will be financially difficult, if not ruinous, for many companies, because they will have to furnish employees with health insurance, paid time off and other benefits, which they do not have to provide to contractors.
Also joining the action with Uber and Postmates were Uber driver Lydia Olson and Postmates driver Miguel Perez. The two drivers said they wish to remain contractors, because of the flexibility it affords them.
Uber and Postmates, as well as Olson and Perez, alleged the law violated their constitutional rights.
District Judge Dolly Gee dismissed the action, which led plaintiffs to appeal.
Circuit Judge Rawlinson said plaintiffs made a good case that Gonzalez allegedly targeted their type of business and disparaged plaintiffs.
"Plaintiffs plausibly allege that the primary impetus for the enactment of AB 5 was the disfavor with which the architect of the legislation viewed Uber, Postmates, and similar gig-based business models. As Plaintiffs plausibly alleged, the exclusion of thousands of workers from the mandates of AB 5 is starkly inconsistent with the bill’s stated purpose of affording workers the 'basic rights and protections they deserve,'" Rawlinson said.
Rawlinson continued, "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."
Rawlinson pointed out many categories of workers were carved out of the law, including other gig companies that offer errand services, such as Task Rabbit and Wag!, which are very similar to Uber and Postmates. In Rawlinson's view, it's possible Gonazalez was motivated by "animus rather than reason" to "single out" Uber and Postmates.
Adding to the mix, California voters passed a proposition in 2020 that declared gig workers should be classified as contractors. Unions and other parties went to court to challenge the proposition, but on March 13, a California state appellate court ruled the proposition passed constitutional muster.
The proposition would still make app-based drivers eligible for some protections, including minimum wage and stipends for health care.
Uber and Postmates have been represented by Theane Evangelis, Blaine Evanson, Alexander Harris, Heather Richardson and Dhananjay Manthripragada, of the Los Angeles firm of Gibson, Dunn & Crutcher.
Bonta has been defended by California deputy attorney generals Jose A. Zelidon-Zepeda, Mark Beckington, Tamar Pachter and Thomas S. Patterson.
Friend-of-the-court arguments on behalf of the state were filed by the International Brotherhood of Teamsters, Service Employees International Union California State Council and United Food and Commercial Workers Union Western States Council.