California defends gig-worker law before Ninth Circuit

(CN) — California tried to persuade an en banc panel of 11 judges of the Ninth Circuit on Wednesday that a 2019 labor law, which requires Uber and certain other app-based businesses to provide their workers with full employee benefits, doesn't unfairly single out the ride-hailing behemoth.

The San Francisco-based federal appellate court gave the state another attempt to defend the constitutionality of the law, Assembly Bill 5, after a three-judge panel at the end of last year agreed to send the case back to a federal judge in Los Angeles to further consider Uber's claim that the distinctions the statute makes between its drivers and other freelancers that get jobs through app platforms aren't rational, but motivated by lawmakers' animus.

The argument before the panel, comprised of five Joe Biden appointees, three Donald Trump appointees, two Barack Obama appointees and one Bill Clinton appointee, centered around the questions of whether California lawmakers had a rational basis for exempting a myriad of professions from its classification requirements and whether it was the court's job to second guess the legislature's motive for these exemptions.

As U.S. Circuit Judge Gabriel Sanchez, a Biden appointee, observed, the U.S. Supreme Court has told courts that all they have to do in challenges like these is to come up with "any reasonably conceivable basis to support the legislation in order to affirm it under rational basis scrutiny."

As such, it may not matter that some California lawmakers, such as Assemblymember Lorena Gonzalez, a San Diego Democrat who teamed up with a host of labor unions to put together AB 5, have made numerous disparaging remarks about Uber and other gig-economy companies that were upending the traditional labor market.

"This was a hotly contested issue," Samuel Harbourt, a lawyer with the California attorney general's office, told the court. "So, the rhetoric was sometimes heated."

The panel didn't indicate how it would rule on Uber's appeal, but the comments and questions by several judges Wednesday appear to show that California's interest in addressing widespread labor misclassification in large industries, such as ride-sharing and delivery services, may be enough for the law to pass constitutional muster in spite of its lack of mathematical precision in the exemptions it made for certain professions.

According to the state, the exemptions to its labor-classification requirements under AB 5 aren't irrational but pertain to professions where workers are, what it calls, genuine independent contractors who have sufficient autonomy and bargaining power to negotiate fair wages and working conditions.

Uber, on the other hand, claims that there is no meaningful difference between hiring a handyman through TaskRabbit, or a dog walker through Wag!, and ordering a ride through its app.

But, Harbourt told the panel, these other apps allow users to browse for the person they want to hire, and the handymen or dog walkers that get jobs through these apps, unlike Uber drivers, can set their own rates.

The outcome of Uber's challenge to AB 5 may be more or less academic, other than so far as it pertains to pending lawsuits, because another California law, Proposition 22, a ballot initiative passed in 2020, carved out exemptions to the AB 5 requirements for Uber, Lyft, and app-based delivery services.

Labor unions have challenged that law, but a California court of appeals ruled last year that it can enforced. The unions' lawsuit is now before the California Supreme Court.

The disputed bill is based on a California Supreme Court ruling that a business must meet a three-prong standard referred to as the “ABC test” in order to classify a worker as an independent contractor.

The law codifies this ABC test so that companies must show they do not directly control the worker; that the work falls outside its usual course of business; and that the worker is “customarily engaged in an independently established trade” for the worker to be considered an independent contractor rather than an employee.

In its appeal, Uber said that after AB 5 passed, Gonzalez tweeted that she had “fought so hard for #AB5 with no gig carveouts” and stated that, although she is open to further exemptions, "network companies" will never be exempted by any such fix.

At Wednesday's hearing, Theane Evangelis, a Gibson Dunn attorney who represents Uber in the litigation, emphasized what she said were the vitriolic attacks of Gonzalez and other lawmakers as evidence that AB 5 was motivated by animus and intended to single out Uber and similar companies.

"They went after us like a heat-seeking missile," Evangelis said in reference to lawmakers' vigilant efforts to exclude Uber from any carveouts they allowed for other businesses in implementing AB 5.

Follow @edpettersson

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