California’s independent contractor law, AB5, has racked up another victory in the federal court system.
The U.S. Supreme Court without comment – which is common practice – denied review Tuesday in the case known both as Olson, for lead plaintiff Lydia Olson, and Uber/Postmates, to distinguish it from other Uber-driven litigation against AB5.
Postmates is now an Uber subsidiary, but the food delivery company was a separate entity when the case was first filed in late 2019.
It’s the second time the Supreme Court could have weighed in on AB5 and chose not to. In June 2022, the court denied certiorari of an appeal by the California Trucking Association of lower court decisions in its legal fight against AB5.
This past June, an 11-judge en banc panel of the 9th U.S. Circuit Court of Appeals reversed a lower court decision and found that AB5 had not unfairly singled out gig drivers like those who work for Uber in crafting AB5.
What the en banc panel said
Among the arguments made by Uber in the Olson case is that the exemptions under AB5 granted to app-based services such as Wag!, which links dog care providers with dog owners the same way Uber links drivers with people who need rides, had denied Uber the equal protection of the laws under the U.S. Constitution.
The judges countered that there were “rational reasons” for the type of differences Uber had focused on its arguments.
“So long as there is some conceivable legitimate purpose justifying the statute, we need not inquire into the legislature’s actual purpose in enacting it,” the 9th Circuit panel wrote. “That A.B. 5 may be underinclusive because it does not extend the ABC test to every industry and occupation that has historically contributed to California’s misclassification woes does not render it unconstitutionally irrational.”
Prop 22 is still in effect
In the background to the Olson case is the fact that California is blocked from enforcing AB5 against gig drivers because of Proposition 22. That is the referendum approved by California voters on Election Day 2020 that barred AB5 from being implemented against gig drivers in the state.
Legal efforts to overturn Prop 22 were originally successful in the state court system, with a judge blocking its implementation over issues of workers’ compensation. But the California Supreme Court last July upheld Prop 22 and its block on implementing AB5 against gig drivers.
In a statement issued to the San Francisco Chronicle, Theane Evangelis, an attorney representing Uber and the other plaintiffs in the case, suggested that Prop 22 would largely negate any impact from the en banc decision in Olson upholding AB5.
“Fortunately, in Proposition 22, California voters rejected AB5 because it threatened to take away the flexible work opportunities of hundreds of thousands of Californians,” Evangelis said in the statement. “Prop 22 remains the law of the land in California and ensures that drivers and couriers retain the independence and flexibility they want and also receive the benefits they deserve.”
While gig drivers appear to be free from AB5’s rules because of Prop 22, implementing AB5 in trucking has been upheld in a series of court decisions coming out of the California Trucking Association case filed against the law in late 2019. A lower court injunction in early 2020 stopped the law from being implemented against trucking, but all court decisions since then went against the CTA effort.
The association in August abandoned its case at the appellate level in the 9th Circuit. However, the Owner-Operator Independent Drivers Association, added as a plaintiff in September 2022, continues to pursue the case in the 9th Circuit.
AB5’s definition of whether a worker can be considered independent or an employee is governed by the ABC test. The three-step test says a worker can be considered independent and not an employee if certain criteria are met:
- The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
- The worker performs work outside the usual course of the hiring entity’s business.
- The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
The B prong is where the transportation industry has focused its concerns. Independent owner-operator truck drivers and gig drivers provide transportation for companies that are, by definition, transportation companies, an obvious problem with the B prong.
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