LOS ANGELES (CN) — Uber Technologies went before the Ninth Circuit Court of Appeals in a bid to resurrect its challenge to a 2019 California law that required it to classify drivers as employees rather than independent contractors.
The ride-hailing and food-delivery behemoth has not backed down from its claims that the state law, AB 5, is both irrational and unconstitutional even though California voters in 2020 approved a ballot initiative, sponsored by Uber and other gig-economy businesses, which exempted app-based ride-hail and delivery companies from the requirement to provide a wide range of employee benefits to their drivers.
According to Uber, its appeal of a federal judge's dismissal of the lawsuit is far from moot because there are still state enforcement actions pending, and the 2020 ballot initiative, Proposition 22, has been found invalid under the California Constitution by a state court judge. That ruling is still under appeal.
Key to Uber's argument is that the California Legislature carved out so many exemptions to its labor classification requirement under AB 5, from lawyers and doctors, to barbers, furniture assemblers and dog walkers that can be hired with the Wag! app, that in the end Uber and other gig-economy giants were arbitrarily singled out as needing to overhaul their business model.
"They came after us like a heat-seeking missile," Uber's attorney Theane Evangelis said at the hearing Wednesday in San Francisco. "There's no single reason to exempt Uber for dogs but not Uber for people."
The law's myriad exemptions appeared to resonate with the Ninth Circuit panel, which repeatedly asked the state's lawyer, Deputy Attorney General Jose Zelidon-Zepeda to explain the rational behind excluding so many occupations, some of which also involve an app-based service to hire a worker, from needing to be classified as employees.
"What is the reason to distinguish between an Uber driver and a TaskRabbit worker," U.S. Circuit Judge Danielle Forrest, a Donald Trump appointee, inquired.
Zelidon-Zepeda referred to the long history of litigation regarding misclassified Uber and Lyft drivers that prompted the Legislature to codify a seminal California court decision on the appropriate test to determine whether a worker should be classified as an employee or an independent contractor.
That response only got him so far, however, because U.S. Circuit Judge Johnnie Rawlinson, a Bill Clinton appointee, opined that the slew of exemptions to AB 5 might have gutted the aim of the statute. U.S. District Judge Morrison England Jr., a George W. Bush appointee who rounded out the panel by designation from the Eastern District of California, also said that there was "no rhyme or reason for the exemptions and carve-outs."
AB 5 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, after the California Supreme Court ruled a business must meet a three-prong standard referred to as the “ABC test” in order to classify a worker as an independent contractor. Companies must show they do not directly control the worker, the work falls outside its usual course of business and the worker is “customarily engaged in an independently established trade.”
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.”
Uber is appealing both the dismissal of its lawsuit by U.S. District Judge Dolly Gee in Los Angeles and her denial of Uber's request for a preliminary injunction to halt enforcement of AB 5 until its constitutionality, or lack thereof, has been decided.
The appellate panel may decide to just overturn Gee's 2021 dismissal of the case, because as Uber argued she didn't assume all the alleged facts in the complaint to be true as she's required to do on a motion to dismiss, without reaching a decision on the merits of Uber's challenge to AB 5.
Evangelis asked the panel also to reverse Gee's denial of the preliminary injunction because Uber is likely to prevail on the merits of its claims.
"There's a hole you can drive a truck through in this law," she said.
The constitutionality of AB 5 is also still a live issue for independent truck drivers in California. Last month, the U.S. Supreme Court declined to review a Ninth Circuit decision that said the state worker-classification requirement is not preempted by federal laws governing the trucking industry and that ordered carriers previously offered a reprieve by a federal judge to begin complying with the law.
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