Sunday, January 5, 2020

Ipse Dixit: The Deep Legal Stirrings in the “Gig” Employers’ Challenge of California Employment Law AB 5

From the beginning, the Achilles heel of the “gig economy” is that its justifications have proceeded as ipse dixit (defined as assertions made but not proved, and as an aside a great name for a Southern rock band). Something about what the new employers were/are doing was/is so new and mysterious it simply cannot be comprehended within the old world order of “employers” and “employees” (let alone ferreted out by notions of control and the Restatement Second Section 220 of Agency). After all, these companies were (and are) not cab companies, not delivery companies, not handyman companies (all which sounds rather “zen”). They. Just. Are. Not. They are technology companies because they use, well, technology. Ipse dixit. At its core, California’s new employment law AB 5—and the ABC employment test that will make it harder for employers to claim their workers are independent contractors—takes the bloom off the rose. As of this month, says California, “prove it, employer – prove that this is not an employment relationship.” The titans of the Gig economy are not pleased. They seek to challenge the law with old, Lochner-era arguments—the Government is interfering with our liberty, and our liberty, akin to the divine right of kings, trumps all. I think these arguments cannot possibly succeed, but there may be constitutional implications for challengers of workers’ compensation laws if they do.

Before thinking of the constitutional implications of the gig employers’ challenge, there is perhaps something more fundamental to point out about the nature of employment law. To me, employment law is deeply instrumental. Employment law obviously regulates employment but it is also profoundly important in communicating social contract policies. We have, for example, an employment law—actually several—that says you can’t discriminate in employment on the basis of race or sex. While employment law is the medium by which social-contract, anti-racist and anti-sexist policy is transmitted, the heart of what is going on is anti-racism and anti-sexism, not employment (which is a necessary, but not sufficient, condition for the policies). We also have a social-contract policy that says, “people who are injured should be adequately taken care of.” Some of that policy is transmitted through the medium of workers’ compensation law; some through tort law; some through social security disability law; some through private disability contract law (ERISA). The underlying policy embedded in the National Labor Relations Act (NLRA) is the facilitation and/or decriminalization of workers taking collective action to level the bargaining playing field against their much more powerful employers, improve their economic circumstances, reduce inequality, and reduce the likelihood of industrial strife. The NLRA is simply a medium for achieving broader social-contract policies. Do the titans of the gig economy imagine that once employment status is eviscerated the social contract policies animating employment law will also be eviscerated? Perhaps. But it’s the old adage, be careful what you wish for. Society may react to such dissolution not by accepting the milquetoast, half-expedient of watered-down “portable benefits,” but rather by requiring users of “independent contractors” also to comply with the social contract policies previously transmitted exclusively through “employment” law. Keep poking California in the eye and let’s see what happens. On the federal side, want to decree that “gig” economy workers can’t unionize under the NLRA? You may have provoked a future Congress to expand such rights. (And let’s not even talk about the Federal Arbitration Act . . .)

But back to contemporary times and the current AB 5 challenge. One count of the titans’ complaint Download Gig complaint alleges in part: “AB 5 violates the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution because it draws classifications between network companies and non-network companies without a rational basis for distinguishing between the two groups.” Tellingly, another part of the same count alleges, “Strict scrutiny review applies because AB 5 is designed to burden, and if enforced against independent service providers like Individual Plaintiffs and network companies such as Company Plaintiffs in a manner consistent with the sponsors’ stated intent would burden, the fundamental rights of network companies and workers to pursue their chosen profession and determine when and how they earn a living.”  Why is this telling? Because equal protection challenges are analyzed under the “rational basis” standard. And under that standard the challenger almost always loses. So yes, titans, you’d better conjure a strict scrutiny argument, even if from thin air, and continually use the word “fundamental” to describe the rights supposedly infringed. A federal due process challenge also makes a predictable appearance in another count of the complaint: “In addition, California businesses have a constitutionally protected interest in operating free from unreasonable governmental interference. Businesses are therefore protected from baseless or invidiously discriminatory standards and have a right to be free from excessive and unreasonable government conduct intentionally directed toward them to force them out of business.” Yes, just like government was “invidiously” trying to force employers out of business when enacting workers’ compensation statutes back in the 1910s. The fact is that the state can exercise its police powers to protect the health and welfare of its citizens. That has been the answer to this argument for roughly eleven decades.

These are, in short, Lochner challenges, and I doubt it will take a federal court long to dispose of them. (I omit here the titans’ challenges under analogous California constitutional provisions, which will share a similar fate—this post is already too long). In short, a California loss in the AB 5 challenge would have me scurrying to call my former Constitutional law professor, Laurence Tribe, for re-immersion into the mystical rites of Constitutional law, because I will clearly have lost “the thread.” But if the Gig titans did prevail, if modern equal protection and due process analysis were stood on its head, straight on up through the federal courts, I can’t help thinking about the potential vulnerability of workers’ compensation laws to various claimant challenges. Some of the objections to draconian scaling-back of claimants’ rights over the past decades have been met with by little more than the argument, “You can’t prove the legislature was insane when it passed this law.” Oh for the abandonment of the “not insane” standard! Perhaps this is the ultimate, cosmic purpose of the emergence of the peddlers of the Gig economy, whose claims proceed apace as ipse dixit.

Michael C. Duff 

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