‘AB 5 is an irrational and unconstitutional statute designed to target and stifle workers and companies in the on-demand economy.’
Represented by the Los Angeles office of the law firm Gibson, Dunn & Crutcher, two drivers joined Uber and Postmates in federal district court in Southern California to challenge the application of AB 5 by Assemblywoman Lorena Gonzalez (D-San Diego), California’s statute that codified the state Supreme Court’s decision in Dynamex and created numerous exemptions for different lines of work from the Court’s ABC Test.
The federal lawsuit by these four parties seeks declaratory, injunctive, and other relief to determine that AB 5 is unconstitutional. Their lawsuit claims AB 5 violates the Equal Protection and Due Process Clauses of the Fourteenth Amendment to the United States Constitution, the Ninth Amendment to the United States Constitution, and the Contracts Clause of Article I of the United States Constitution, as well as the Equal Protection Clause, Inalienable Rights Clause, Due Process Clause, Baby Ninth Amendment, and Contracts Clause of the California Constitution.
The lawsuit claims “AB 5 is an irrational and unconstitutional statute designed to target and stifle workers and companies in the on-demand economy.” It characterizes on-demand work as app-based work that empowers individuals to generate income on a flexible work schedule. The app-based, on-demand economy also benefits consumers, the parties assert.
Uber and Postmates claim the only service that network companies provide is access to an app. They do not hire drivers or delivery persons; instead, they are technology companies that create and operate apps which facilitate the connection of consumers and independent service providers in order that consumers can hire an independent service provider to perform particular services.
The lawsuit also claims that “some California legislators have irrationally attacked” the on-demand economy and that “this hostility towards the on-demand economy held by Assemblywoman [Lorena] Gonzalez [the bill’s author] and many of her colleagues in the California legislature ultimately led to the passage of AB 5.”
The plaintiffs allege that, if AB 5 were enforced against them in a manner consistent with the legislators’ stated intent to require reclassification of workers in the on-demand economy, “it would harm many independent service providers who prefer to provide services on their own schedules via the app-based platforms that network companies operate. Inevitably, forced reclassification would eliminate the flexibility and entrepreneurship that is the foundation of platform-based work.”
The plaintiffs also assert that “AB 5 goes much further [than the Dynamex decision], and codifies the ABC test for not only wage orders but also for the California Unemployment Insurance Code and the entirety of the California Labor Code. It also attaches the threat of criminal sanctions by making misclassification a misdemeanor or even a felony under California law pursuant to penalties provided for in the existing Labor Code.”
In addition, “the irrationality of AB 5 is confirmed by its laundry list of exemptions. AB 5 spends only a few lines of text adopting the ABC test. The vast majority of the statute is a list of exemptions that carve out of the statutory scope dozens of occupations, including direct salespeople, travel agents, grant writers, construction truck drivers, commercial fisherman, and many more. There is no rhyme or reason to these nonsensical exemptions, and some are so ill-defined or entirely undefined that it is impossible to discern what they include or exclude.”
Furthermore, the federal lawsuit claims that the “targeting of app-based workers and platforms and treating them disparately from traditional workers violates the Equal Protection Clauses of the United States and California Constitutions. There is simply no rational basis for subjecting exempt occupations and non-exempt occupations to different rules and burdens.”
The plaintiffs assert that “app-based independent service providers and the companies that operate the platforms they use have a constitutional right to pursue the occupation of their choice—not to be forced to be employees when they are independent, or to be forced to be taxi or delivery companies when they are technology companies.” AB 5 also violates the Contracts Clauses of the federal and state constitutions because the network companies have written contracts that connect consumers with independent service providers.
When outlining the more than thirty-five exemptions found in AB 5, the plaintiffs argue that “many of the exemptions are wholly arbitrary. For example, a delivery truck driver is exempt when delivering milk, but not when delivering juice, fruit, baked goods, or meat products.” Moreover, “the legislature included many of the exemptions as political favors or to politically favored groups without any valid legislative purpose or rational basis.”
Because dozens of provisions of the Labor Code provide criminal penalties for violations, civil penalties also may attach due to AB 5’s enactment. And, if AB 5 forces these app-based companies to make service providers employees of their companies, then it would cause substantial economic and non-economic harm to the companies, independent service providers, and the consumers of the on-demand economy.
The plaintiffs further argue that “the flexibility that has defined the on-demand economy, fueled its growth, and empowered independent service providers would be replaced with the rigid and inflexible 9-to-5 business model to the detriment of network companies, independent service providers and, ultimately, consumers.”
The federal lawsuit makes the following constitutional arguments:
- AB 5 violates the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution because it draws classifications between network companies and non-network companies without a rational basis for distinguishing between the two groups.
- Likewise, the statute draws irrational distinctions between independent service providers and non-independent service providers that perform substantially the same work, disfavoring independent service providers relative to similarly situated non-independent service providers.
- Laws unconstitutionally singling out a certain class of citizens for disfavored legal status or general hardships are rare. AB 5 is such an exceptional and invalid form of legislation.
- Legislatures may not draw lines for the purpose of arbitrarily excluding individuals, including by doing so as a concession to one constituent but not another. Yet, the sponsors of AB 5 included the exemptions solely in response to the demands of political constituents.
- AB 5 is not narrowly tailored to any compelling governmental interest, nor is it the least restrictive means to serve any such end. It is not even rationally related to any legitimate governmental interest. It has no substantial relation to the public, health, safety, or morals, or to the general welfare, and it is not congruous with any legitimate purpose the government may proffer.
There are at least two other pending lawsuits against AB 5, including one from the California Trucking Association based upon federal FAAA preemption and one by freelance writers based upon the arbitrary 35 article limitation for writers.
- Economic Impact Analysis Under the APA - October 25, 2021
- Public Hearings Under the Administrative Procedure Act - October 23, 2021
- General Provisions of the California Administrative Procedure Act - October 23, 2021