Tuesday, February 11, 2020

Federal Judge Denies Injunctive Relief in Case Challenging California’s AB 5

In a 24-page decision that went much as I expected, a Federal district judge in the Central District of California concluded that California Assembly Bill 5 2019 (AB 5) was rationally-related to a legitimate state interest, did not deprive gig economy workers of the right to pursue their chosen occupation, and did not unconstitutionally impair Gig employers’ contracts with workers. The core of the challenge sounds in equal protection, and the court found plaintiffs Lydia Olson, Miguel Perez, Postmates, and Uber unlikely to prevail on its merits. With respect to the request for injunctive relief:

 When “an injunction is requested which will adversely affect a public interest . . . the court may in the public interest withhold relief until a final determination of the rights of the parties, though the postponement may be burdensome to the plaintiff.” . . . Considering the potential impact to the State’s ability to ensure proper calculation of low income workers’ wages and benefits, protect compliant businesses from unfair competition, and collect tax revenue from employers to administer public benefits programs, the State’s interest in applying AB 5 to Company Plaintiffs and potentially hundreds of thousands of California workers outweighs Plaintiffs’ fear of being made to abide by the law.

Accordingly, injunctive relief was denied. “For the reasons stated below, the Court does not find likelihood of success on the merits or that sufficiently serious questions have been raised as to the merits of these claims.” (This case is not directly related to the “trucker preemption” matter under the FAAAA concerning which I’ve written in these pages).

The decision is complex and well worth reading in its entirety. One section of interest:

 . . . evidence submitted by Plaintiffs indicates that according to academic studies, “a majority of workers do not value scheduling flexibility” and only a “substantial share”—by inference, less than a majority—“are willing to give up a large share of their earnings to avoid employer discretion in setting hours.” McCrary Decl. at ¶ 26. This statement by Plaintiffs’ expert indicates that of the 395,000 or more drivers for Uber and/or Postmates, a majority may favor—or at least be neutral to—the application of AB 5 to their worker classification. To be sure, Olson, Perez, and individual amici attest that being classified as employees would be financially devastating and upend their schedules and expectations. See, e.g., Perez Decl. ¶¶ 8, 18–20; Olson Decl. at ¶¶ 10, 12; see also Br. of Amici Curiae U.S. Chamber of Commerce, Engine Advocacy, and TechNet at 10 (citing U.S. Dep’t of Labor, Contingent and Alternative Employment Relationships, Bureau of Labor Statistics, (May 2017) (79 percent of independent contractors prefer their work arrangement). The Court does not doubt the sincerity of these individuals’ views, but it cannot second guess the Legislature’s choice to enact a law that seeks to uplift the conditions of the majority of non-exempt low income workers rather than preserve the status quo for the smaller subset of workers who enjoy independent contractor status. (emphasis supplied)

My translation? Even if a minority of the population has sincere reasons for not wanting to be protected by the rules of the road it does not follow that the state must eliminate the rules of the road. (I have recently written about this idea in these pages). Or put somewhat differently, the state (a.k.a. the democratic polity) is entitled to exercise legitimate police power to protect its citizens. While the 14th amendment places limits on the exercise of legislative power, those limits are very sharply circumscribed—as challengers of workers’ compensation laws know only too well. This was a principle that became well-established during the era of enactment of workers’ compensation statutes; it is one of the central theses of  New York Central R. Co. v. White, 243 U.S. 188 (1917).

It was also interesting to see Chamber of Commerce types have to grapple with a proposition that has bedeviled claimants challenging workers’ compensation laws: “The burden is on plaintiffs to negate ‘every conceivable basis’ which might have supported the distinction between exempt and non-exempt entities.” I have written in these pages about how difficult it is to overcome this standard.

Lydia Olson, et al.—which is ultimately about the state’s power to impose the ABC employment test on classes of putative employers—now moves on to the merits phase. As I have said in these pages, I don’t see how plaintiffs can prevail under existing law. But it appears likely that they have advanced and structured the case for review by the current U.S. Supreme Court. And we have some recent history of the ad hoc flexibility that body has afforded the 14th amendment in key moments, so this is not an irrational strategy.

Michael C. Duff


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