Together on Monday, local app-based, gig-worker-driven businesses Uber and Postmates sued the State of California, seeking a preliminary injunction to halt a new law that is set to go into effect on January 1. The law poses an existential threat to businesses that rely on contract employees, and the companies say it is unconstitutional.
In a savvy legal move that was inevitable, Uber Technologies and Postmates filed suit in the U.S. District Court for the Central District of California in Los Angeles, saying that new state law known as AB-5 "is an irrational and unconstitutional statute designed to target and stifle workers and companies in the on-demand economy." Further, the suit states that the law infringes on independent contractors' "fundamental liberty to pursue their chosen work as independent service providers and technology companies in the on-demand economy."
As the Business Times notes, if the companies win the temporary injunction they're seeking, they will be buying months if not years in this fight over what constitutes an employee — and it will give time for a ballot-measure campaign by Uber, Lyft and Doordash to gain traction before November, in which voters can decide whether they want to strike down the law.
AB-5 passed both chambers of the statehouse back in September, after months of debate stemming from an April 2018 court decision known as the Dynamex ruling. In that ruling, the California Supreme Court established a test to determine if workers can be classified as independent contractors — a big question in the test being "Do the workers perform a service that is 'outside the usual course of the hiring entity’s business'?"
The law was seen by many labor activists and struggling gig-economy workers as being a potential salvation that would lead to more full-time employment, while many — including those who prefer making a living on a freelance basis. The legal trouble will come as the companies attempt to argue that a) they are in the app business, and not in the delivery or driving business, and that b) they are not directing their drivers to work certain hours or within certain guidelines, as one would with employees.
As the Associated Press reports, Uber has indicated that it will seek to link the new lawsuit with a separate suit brought earlier this month on behalf of a group of freelance journalists who do not want to be limited in their ability to work as contractors — many see the law as potentially leading to less work, rather than more full-time employment opportunities.
Democratic Assemblywoman Lorena Gonzalez of San Diego, who helped craft AB-5, tells the AP in a statement, "The one clear thing we know about Uber is they will do anything to try to exempt themselves from state regulations that make us all safer and their driver employees self-sufficient. In the meantime, Uber chief executives will continue to become billionaires while too many of their drivers are forced to sleep in their cars."