AB 5 Referendum: the optics are now even worse

In less than three months, California voters will be asked to decide the fate of the Protect App-Based Drivers and Services Act, the Assembly Bill 5 end-run sponsored by Uber, Lyft, Instacart and DoorDash. The companies have spent $90 million since AB 5 went into effect Jan. 1 in their quest for a magical trap door while the walls have been steadily closing in on them.

It is universally acknowledged that AB 5 (codified as Labor Code Section 2750.3) didn't get things exactly right. Categories of independent workers were inadvertently swept into the ABC tent that should have remained outside, and efforts are underway to rectify this oversight. Presently, more than a dozen bills are pending in Sacramento to carve out a range of professions from Dynamex's stringent "ABC" test (see Dynamex Operations West v. Superior Court, 4 Cal.5th 903 (2018)) and subject them to the older, more malleable 11 factors from S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations, 48 Cal. 3d 341 (1989). Among the proposed exemptions are the following: still photographers, photojournalists, freelance writers, editors, and newspaper cartoonists; licensed pharmacists; physical therapists; providers of barbering and cosmetology services; livestock judges, musicians and music industry professionals; certified shorthand reporters; referees and umpires for independent youth sports; and newspaper carriers.

Transportation companies such as Uber, Lyft and DoorDash are glaringly absent from the list of proposed legislative carve-outs. The November ballot measure, if passed, would achieve something that even the legislature is unwilling to consider. It would expressly carve transportation companies out of the ABC test and maintain the fiction that ride-hail and delivery drivers are independent contractors accountable to nobody but themselves.

That these ride-share and delivery companies have been masquerading as technology companies is no secret. Appellate courts have upheld the applicability of Dynamex to their services and in June the California Public Utilities Commission ordered the companies to reclassify their drivers as employees or risk losing their licenses to operate as transportation companies throughout the state.

The companies would have voters believe that their drivers would be disadvantaged if they lost their purported "freedom" and "flexibility" by becoming employees, but that rosy sales pitch could now be landing on deaf ears. A devastating pandemic has completely altered the picture. Stories of Uber and Lyft drivers struggling to feed their families and keep roofs over their heads have laid bare the truth: These gig workers are utterly dependent on companies that could care less about their well-being. The gig economy's worker-bee "independent contractors" rely on a house of cards and it only took one strong gust -- the coronavirus -- to knock it down.

While other companies have been paying into states' unemployment and workers compensation programs to ensure that their employees have a safety net at this precarious time, Uber and the others have spent their money on public relations and ballot measures. They were ultimately forced by catastrophic declines in demand for their transportation service to unabashedly beg on bended knees for a federal taxpayer bailout earmarked as unemployment insurance for their "independent contractors."

In May, California Attorney General Xavier Becerra and the city attorneys of Los Angeles, San Francisco and San Diego finally decided that enough was enough. They filed a lawsuit seeking declaratory relief for the extraordinary pandemic assistance they were required to provide to unemployed drivers who would have been covered by unemployment insurance had they been correctly classified as employees. The companies violated unfair competition laws under the Business and Professions Code when they misclassified their drivers, according to the lawsuit, and they must now cough up the payroll taxes that they would have paid had they complied with AB 5 beginning on Jan. 1. Pending resolution of that case, it is reported that Becerra and the city attorneys will be filing a motion for a preliminary injunction to compel the ride-hailing companies immediately to reclassify drivers as employees.

The question that voters must ask, in the wake of the coronavirus, is as follows: Why should taxpayers be left paying the bill for sick and unemployed workers because of a flagrant disregard for the law by these companies? Uber and Lyft drivers aren't as organized or well-funded as the companies in whose hands their livelihood lies, but it's more important than ever that they drive home the message that voters can't afford to abandon them. Taxpayers have been paying, and could continue to pay, a steep price for the companies' hubris unless the law is left intact and enforceable against them.

Should the measure pass in November, it will almost certainly face court challenge. Voters cannot simply abrogate the legislative function, where the Legislature, through AB 5, made clear Dynamex encompasses these workers. The judiciary, through Dynamex, established the test for properly classifying independent contractors, and AB 5 was merely a codification of Dynamex. To legislate against AB 5 would be a challenge to the judiciary's purview, which could be unconstitutional. Neither rideshare company has yet been forced to argue the ABC test in court, but their chances of prevailing at this point are slim to none. Expect to see any voter-approved measure go to the 9th U.S. Circuit Court of Appeals, whose charge would be to look to the California Supreme Court for guidance. That court will not likely overturn Dynamex, its own decision. 