Federal Judge Blocks First Attempt By Rideshare Companies to Halt AB 5

“We are joining a growing group of companies and individuals suing to ensure that all workers are equally protected under the law and can freely choose the way they want to work.”  ~Uber

On Monday, Los Angeles District Court Judge Dolly M. Gee, an Obama appointee, ruled against Postmates and Uber’s preliminary motion to halt AB 5 while they challenge the new law in court.

Rideshare companies lose the first round of court decisions

The suit, filed on behalf of Uber driver Lydia Olson and Postmates driver Miguel Perez in December of last year, is currently one of three methods being used to get rid of the independent contractor and employee redefinition law AB 5 this year. In addition to the lawsuit, a ballot measure and a bill currently being considered for a committee vote are also challenging the law.

The rideshare companies failed to temporarily stop the law largely due to Judge Gee’s interpretation of the law and the circumstances surrounding it.

“The balance of equities and the public interest weigh in favor of permitting the State to enforce this legislation,” Judge Gee said in her decision. “We cannot second guess the Legislature’s choice to enact a law that seeks to uplift the conditions of the majority of non-exempt low-income workers rather than preserve the status quo for the smaller subset of workers who enjoy independent contractor status.”

The ruling by Judge Gee allows AB 5 to remain law as the trial continues.

Rideshare companies respond

Both rideshare companies announced their displeasure of Monday’s rulings in press statements.

“As witnessed by truckers, freelance journalists and countless other occupations, AB 5 is undercutting workers across the economy,” announced Postmates. “Postmates remains committed to the modernization of worker classification and worker protections and sees our ballot conversation with voters, our legal conversation with drivers, and our continued outreach to all stakeholders as critical pieces to an enduring pro-worker, pro-innovation solution that preserves the flexibility and autonomy of California workers while adding meaningful benefits.”

Uber also released a statement, saying “We are joining a growing group of companies and individuals suing to ensure that all workers are equally protected under the law and can freely choose the way they want to work.”

The ruling comes only days after a new fast tracked bill was introduced into the Assembly giving freelance journalists an exemption. The bill, introduced by AB 5 author Assemblywoman Lorena Gonzalez (D-San Diego), has largely been seen as a corrective bill written into response to an overwhelmingly negative response to the limits it placed on freelance journalists.

Hard times for rideshare companies in the months ahead

“The judge’s ruling is going to make things harder for Uber and other companies,” said Scott Rhine a Los Angeles-based stockbroker. “This law is going to be hanging around their industry at a very volatile time for them. When they went public last year they fell in value fast, and now with profits almost guaranteed to be lower because of all the extra money going into the effects of the new laws, it may kill them.”

“Investors hate all of this uncertainty, and a lot of people who have some sort of stake in the companies don’t want to see their investment disappear. I know this is about employee welfare and giving better conditions, but there’s no way you can do that or start to negotiate up when there isn’t even a company to begin with. That’s what a lot of people who are for AB 5 forget. They aren’t looking at the long-term growth and rise in wages and benefits in a few years. They want it all now when the companies are still trying to scramble around all of these sudden new changes.”

Despite the win by the state on Monday, the lawsuit is expected to continue throughout much of the year, pending other actions around it.

“It’s all up in the air right now,” added Rhine. “Who knows how the chips are going to have fallen six months from now? Or even one month from now?”