Gig companies unveil ballot initiative to carve out their workers from new labor law

SACRAMENTO -- A group of gig economy companies unveiled their long-rumored challenge to AB 5 on Tuesday, setting up a multimillion-dollar 2020 ballot initiative battle.

The narrowly-tailored measure creates the carve-out from the law these companies were unable to get from the Legislature. It is not a referendum on the overall law.

If passed, it would allow gig companies like Uber Technologies Inc. and Lyft Inc. to continue to utilize drivers as independent contractors rather than employees. In exchange, it would offer sweeteners for drivers and other gig workers, like a pay floor and medical stipends.

Just as AB 5 itself was a direct reaction to a court case, the initiative will play out against a legal backdrop. If the effort does end up in court, the initiative's backers will likely be at a major disadvantage.

With so much money at stake, it is highly likely Attorney General Xavier Becerra's title and summary language will be challenged, especially if the deep-pocketed companies behind the effort feel this language is unflattering.

But courts have recently affirmed Becerra's office has wide discretion in writing this language. The state Department of Justice has already defeated a direct challenge to the Dynamex ruling.

Signed last month, AB 5 codifies the California Supreme Court's ruling in Dynamex Operations West Inc. v. Superior Court, 2018 DJDAR 3856. The court threw out the 30-year-old, 11-part Borello test for whether a worker should be classified as an employee or an independent contractor. The court's new "ABC" test is far more likely to result in a worker being classified as an employee.

Uber, Lyft and the food delivery service DoorDash Inc. have each donated $30 million toward the ballot effort. The grocery deliver service Instacart.com says it is also on board with the effort but so far has not contributed money. At the Tuesday press conference, the main voices were those of drivers and other gig workers, who praised the flexibility the work gave them in dealing with responsibilities like school and child care. This focus on workers was evident in the initiative's name: Protect App-Based Drivers & Services.

Lyft driver Akamine Kiarie is a recent community college graduate starting at Sacramento State University in January. He told reporters driving for Lyft gives him the flexibility to work around his class schedule.

"I'm a student, and the income helps me pay for college," Kiarie said. "Driving allows me to put my education first."

According to a press release from the coalition, gig workers would be guaranteed 120% of the minimum wage, 30 cents per mile for wear and tear on their cars, a health care stipend if they work more than 15 hours a week, and other protections. AB 5's author, Assemblywoman Lorena Gonzalez, D-San Diego, quickly took to Twitter to detail the many ways she said the initiative offers less than the current law. She said employees get 58 cents a mile, overtime and Medicare and Social Security payments not guaranteed under the initiative.

If the initiative does pass, it would require a 7/8ths vote of the Legislature to modify. At least for the foreseeable future, that would mean getting Republican votes.

At the press conference, campaign spokesman Brandon Castillo said most initiatives contain no way for the Legislature to change the rules. When asked why the initiative did not include a path to unionization, he said, "All of our clients made it clear they prefer a legislative path. We think the Legislature is the appropriate place to deal with things like unionization."

Those clients will certainly have the money to challenge unflattering ballot language in court but would face a high bar. In 2017, proponents of a gas-tax repeal initiative were able to convince Sacramento Superior Court Judge Timothy M. Frawley to rewrite parts of Becerra's ballot descriptions. But a unanimous panel on the 3rd District Court of Appeal reversed the decision, citing the attorney general's "extensive discretion" in the area. The state Supreme Court then declined to hear Becerra v. Superior Court of Sacramento County, C085670 (Cal. App. 3rd, filed Oct. 6, 2017). Becerra's office has also been turning back efforts to undermine Dynamex in the federal courts. The Western States Trucking Association sued the acting director of the California Department of Industrial Relations, claiming the Dynamex ruling was preempted by the interstate commerce clause of the U.S. Constitution and several federal laws.

U.S. District Judge Morrison C. England Jr. dismissed the case in March, writing that the plaintiffs "failed to state a viable claim against defendants either on preemption or constitutional grounds" or even to show his court had jurisdiction. The group dropped an appeal to the 9th U.S. Circuit Court of Appeals in September in Western States Trucking Association v. v. Schoorl, 18CV01989 (E.D. Cal., filed July 19, 2018).