Los Angeles, Calif. (February 26, 2020) - On February 10, 2020, the Central District of California denied a request for preliminary injunction filed by Uber and Postmates to block enforcement of California Assembly Bill 5 (AB 5).
AB 5, which took effect on January 1, 2020, is a controversial bill that makes it harder for workers to be classified as independent contractors. AB 5 codifies the three-prong ABC test the California Supreme Court adopted in Dynamex to determine whether workers should be classified as either employees or independent contractors.
Under the ABC test, all workers are presumed employees – subject to several exceptions – unless the following three conditions are met:
- The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
- The person performs work that is outside the usual course of the hiring entity's business; and
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
In Olson et al. v. State of California, et al., U.S. District Judge Dolly Gee denied a request for preliminary injunction to block AB 5 from enforcement pending the resolution of Uber and Postmates' suit challenging the constitutionality of AB 5. Uber and Postmates argued that AB 5 violates the Equal Protections Clause, due process, and the Contracts Clause of the United States and California constitutions. However, Judge Gee held that Uber and Postmates "have not shown serious questions going to the merits" of their case, and noted that "public interest weigh[s] in favor of permitting the State to enforce this legislation."
There are several pending challenges to the enforcement of AB 5, but the denial of the preliminary injunction filed by Uber and Postmates to block enforcement of AB 5 does not bode well for the challenges to AB 5 from companies in the gig economy.
Unlike the lawsuits attempting to block AB 51 from enforcement, which unlawfully attempts to curtail the right of employers to use mandatory arbitration agreements, challenges to AB 5 are not likely to be successful. Employers should be ready to fully comply with AB 5's requirements and should not hold out hope that it will be blocked from enforcement.
We will provide updates should the status of this litigation change.
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