Uber, Postmates are denied an injunction of gig worker law

A federal judge on Monday formally denied Uber and Postmates' motion for a preliminary injunction against Assembly Bill 5, the law that aims to crack down on abuses in the gig economy.

Uber Technologies Inc. and Postmates Inc. asked for the preliminary injunction on Jan. 8, shortly after filing a lawsuit to block AB 5. The bill, which took effect Jan. 1, requires that workers be classified as employees unless they pass a three-part "ABC" test to prove their status as independent contractors. Olson v. California, 19-CV10956 (C.D. Cal., filed Dec. 30, 2019).

While the original complaint contained 10 claims, including allegations AB 5 violates the Ninth Amendment to the U.S. Constitution, the plaintiffs' motion for a preliminary injunction focused only on "AB 5's alleged discrimination against Plaintiffs in violation of Equal Protection, deprivation of Individual Plaintiffs' substantive due process right to pursue their chosen professions, and impairment of contracts between Individual and Company Plaintiffs," according to Monday's order.

After issuing a tentative ruling Friday, U.S. District Judge Dolly M. Gee said in her Monday order AB 5 does not specifically target gig economy companies in a way that violates Equal Protection, does not take away the rights of gig economy workers to pursue their chosen occupation, and does not impact Uber and Postmates' contracts and their workers.

The judge conceded, however, that the plaintiffs could potentially suffer irreparable harm -- one of four criteria applicants for preliminary injunctions are required to prove. AB 5 gives city attorneys the power to bring injunctive actions against companies and exposes the latter to potential criminal penalties.

Olson v. California is one of multiple lawsuits challenging AB 5 .

In January, a federal judge in the Southern District of California granted a preliminary injunction in California Trucking Association v. Becerra, 18-CV02485 (S.D. Cal., filed Oct. 25, 2018), barring the state from enforcing AB 5 on motor carriers, including trucking companies and independent owner-operator truck drivers.

Derek Ishikawa, an associate at Hirschfeld Kraemer, said when compared with the trucking case, the argument for a preliminary injunction brought by Uber and Postmates "was always going to be a stretch."

The companies' argument that AB 5 is specifically targeting the gig economy doesn't hold, Ishikawa said.

"They're not the only ones that AB 5 focuses on. There are a lot of exemptions in there," he said. "This idea that there's an animus against the gig economy particularly was always going to be a challenge."

In California Trucking Association v. Becerra, the Southern District of California said a federal law, the Federal Aviation Administration Authorization Act of 1994, preempted AB 5 by prohibiting states from enforcing any law, regulation, or provision that might impact the service, price, or route of truck drivers.

Uber and Postmates cannot make a similar argument, Ishikawa said.

"You don't have a preemption argument that I've seen for the gig economy ... particularly with respect to Uber and Postmates," he said. "I don't think they can argue there's any federal statutory regime that prevents California from regulating the relationship between gig workers and gig companies."