(CN) — The Ninth Circuit Court of Appeals vacated its March ruling that had reinstated Uber's bid to thwart a California labor law requiring the ride-hauling behemoth to classify its drivers as employees rather than independent contractors.
The San Francisco-based court of appeals on Monday issued an order that an en banc panel of 11 randomly selected judges will rehear Uber's attempt to overturn a trial judge's dismissal of its challenge to the California law.
A customary three-judge panel had agreed that Uber made a plausible argument that it was unfairly singled out by California lawmakers when they required some app-based businesses to pay their workers full employee benefits — while creating exceptions from this requirement for a multitude of professions, including lawyers and doctors, barbers, furniture assemblers and dog walkers that can be hired with the Wag! app.
Judges on federal appellate courts can, when asked to do so by the losing side, vote to rehear a case before a panel of all judges of the court — or before a panel of 11 judges, in the case of the Ninth Circuit, which has a large number of judges — when they believe the complexity or the importance of the case merits a more thorough review.
"The panel decision correctly — and unanimously — reversed the district court’s dismissal of my clients’ equal protection claim," said Theane Evangelis, an attorney for Uber.
"As the panel emphasized, my clients plausibly alleged the legislature unfairly targeted them, out of 'animus rather than reason.' The decision followed well established law, and should stand. We look forward to presenting our arguments to the en banc Ninth Circuit."
The rise of the so-called gig-economy, where drivers, delivery workers and the like sign on to provide on-demand services through app-based platforms, created a backlash by organized labor and lawmakers, who saw the new economic model as depriving many workers from protections such as overtime pay and sick leave.
In 2019, California lawmakers passed Assembly Bill 5, which was put together by Assemblymember Lorena Gonzalez, a San Diego Democrat who teamed up with a host of labor unions including the Service Employees International Union, California Labor Federation and State Building and Construction Trades Council.
The law followed 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.
AB 5 codified 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.”
That argument resonated with the three-judge panel that reinstated Uber's challenge to the law, which had been dismissed by a trial judge in Los Angeles. The judges agreed the company had made a tenable case that its exclusion from the wide-ranging exemptions, including for comparable, app-based gig companies, could be attributed to animus rather than reason.
"Plaintiffs plausibly allege that the primary impetus for the enactment of A.B. 5 was the disfavor with which the architect of the legislation viewed Uber, Postmates, and similar gig-based business models," U.S. Circuit Judge Johnnie Rawlinson, a Bill Clinton appointee, wrote in March.
"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."
The Ninth Circuit decision in March came after a ruling by California's First Appellate District that found Proposition 22, a ballot initiative passed in 2020 that carved out exemptions to the AB 5 requirements for Uber, Lyft, and app-based delivery services, is enforceable. Proposition 22 had been challenged by labor unions, and a judge in 2021 ruled in their favor and found it violates the California Constitution.
That state appellate court ruling doesn't necessarily moot Uber' lawsuit over the constitutionality of AB 5 because the California Supreme Court has yet to review the unions' bid to invalidate Proposition 22.
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