Uber's and Lyft's AB 5 Hail Mary: Optics aren't everything

Following the passage of Assembly Bill 5, ride-sharing companies Uber and Lyft have invested heavily in a ballot measure designed to replace the new worker classification law with something much more to their liking. In what could only be described as the legal equivalent of a Hail Mary, they're throwing their full corporate weight behind a pass to the voters to reverse Dynamex Operations West v. Superior Court, 4 Cal. 5th 903 (2019), for their benefit.

It's called the Protect App-Based Drivers and Services Act, and it's a clear attempt to legislate a carve-out to the law of the land. Via referendum, voters will be allowed to decide how app-based driving companies such as Uber and Lyft should classify their workers. Despite the fact that appellate courts have upheld the applicability of Dynamex to these services and that the Legislature rejected any carve-out for them, they seem to believe that third time's a charm.

And they may be right. The proposed act would amend Division 3 of the Business and Professions Code. Its opening text, at Section 7449, reads like an ode to the gig economy:

"(a) Hundreds of thousands of Californians are choosing to work as independent contractors in the modern economy using app-based rideshare and delivery platforms to transport passengers and deliver food, groceries, and other goods as a means of earning income while maintaining the flexibility to decide when, where, and how they work. ...

"(c) Protecting the ability of Californians to work as independent contractors using app-based rideshare and delivery platforms is necessary so people can continue to choose which jobs they take, to work as often or as little as they like, and to work with multiple platforms or companies -- all the while preserving access to app-based rideshare and delivery services that are beneficial to consumers, small businesses, and the California economy."

What the companies propose sounds great. They would pay drivers 120% of minimum wage and would provide health insurance subsidies, disability coverage and other substantive benefits. The optics may be sufficient to tilt the scales in favor of the companies at the ballot box. Uber and Lyft have smartly coordinated their offensive strategy, and we can expect well-orchestrated media and ad campaigns into the 2020 election cycle.

But optics aren't everything. A rosy write-up doesn't change the fact that drivers, under the alternative law, wouldn't be paid for waiting time -- as they would be under AB 5. Unless they're in revenue-generating mode, they're off the clock. This is tantamount to piece-rate work, something that should have died off well back in the last millennium. Drivers who spend significant portions of their work day in wait mode could end up earning far less than minimum wage.

The drivers' defensive strategy might take the form of a counter ballot measure expressly naming the companies as their employers. Unfortunately, Uber and Lyft drivers aren't nearly as organized as the companies in whose hands their livelihood lies. Without a strong driver media strategy, it's unlikely the public will understand and appreciate what is at stake.

Ultimately, Uber and Lyft may end up on the wrong side of the law even if they get their Hail Mary. The betting line is that if the measure passes it will be challenged in court. Dynamex was a clarification of existing law, and AB 5 was a codification of Dynamex. A 2017 Uber class-action settlement was a tacit acknowledgment of this reality, but neither rideshare company has been forced to argue the ABC test in court. Expect to see this go to the 9th U.S. Circuit Court of Appeals, whose charge will be to look to the California Supreme Court for guidance.

Not even the richest companies can legislate their way out of legal principles established by the judiciary. The courts can, and may, find the ballot measure at odds with the founding legal precedent that gave AB 5 life and strike it down. Until that time, drivers will continue to be classified as contractors

At best, we can expect at least 18 months of uncertainty as AB 5 (aka ABC) wends its way through the courts. 