AB5 case still alive in Ninth Circuit

Does California’s AB5 place an undue burden on interstate commerce and discriminate against truck drivers?

That’s the question that faces the U.S. Court of Appeals for the Ninth Circuit.

California signed Assembly Bill 5 into law in 2019. The worker classification law has been battled in court ever since. AB5 requires a business to demonstrate three factors are established before a worker can be considered an independent contractor. The B prong of the ABC Test requires the worker being used as an independent contractor to provide a service that is outside the company’s usual course of business. Many in the trucking industry have argued that the B prong effectively ends a longstanding business model of leased owner-operators.

In August, the Owner-Operator Independent Drivers Association filed an appeal to the Ninth Circuit, saying that AB5 specifically targets truck drivers.

“AB5’s blanket prohibition of leased owner-operators constitutes an unreasonable burden on interstate commerce in violation of the dormant Commerce Clause of the U.S. Constitution under the test established by the Supreme Court in Pike v. Bruce Church Inc.,” OOIDA wrote. “Under Pike’s balancing test, AB5’s burden on leased owner-operators is absolute, and the benefits to the state are minimal, if not illusory. There is no cost truckers can incur or administrative hurdle they can overcome to keep their independent contractor small businesses as leased owner-operators.”

OOIDA also contends that AB5 violates the Equal Protection Clause, as California provides an exemption that intrastate truckers can use but federally regulated interstate truckers cannot.

In a response brief to the U.S. Court of Appeals for the Ninth Circuit, California defended AB5, saying it does not violate the Constitution.

“California’s Assembly Bill 5 was enacted to address the misclassification of employees as independent contractors,” the state wrote in the brief filed on Nov. 4. “AB5 adopts the ABC Test as the classification standard for workers in hundreds of industries across the state. The ABC Test makes it more difficult for employers to evade labor requirements than under the relatively manipulable and indeterminate 11-factor balancing test that applied before AB5’s enactment. As a result, more workers stand to gain the benefits and protections provided by California labor law, such as a minimum wage, workers’ compensation coverage and unemployment insurance.”

California argues that OOIDA overstates the changes involved in reclassifying a leased owner-operator as an employee.

“OOIDA misstates the effects of classifying owner-operators as employees,” the state wrote. “The only consequence under California law is that motor carriers will be required to provide owner-operators with certain benefits and protections, such as a minimum wage, workers’ compensation, unemployment insurance and sick leave.”

However, opponents of AB5 argue that the shift from owner-operator to employee will mean owner-operators losing flexibility and control over their work.

As of press time in early November, OOIDA’s reply brief was due Nov. 25.

Supreme Court elects not to hear AB5 gig worker case

While OOIDA’s case over AB5 in the trucking industry is still alive, the U.S. Supreme Court recently closed the door regarding gig workers’ complaints over the state law.

In an order filed on Oct. 15, the Supreme Court officially denied a petition to continue Lydia Olson’s case against the state’s worker classification law.

Olson, who represents gig workers such as drivers for Uber and Postmates, claimed that California unfairly provided AB5 exemptions to some companies but not others.

“In an effort to punish network companies like Uber and Postmates, the California Legislature created a two-tier legal standard that imposed a stringent test for independent-contractor status on disfavored network companies and others, while rolling back legal protections for millions of workers from hundreds of other different professions and industries – with no rational basis for the differing treatment,” Olson’s petition to the Supreme Court stated. “Many of the industries exempted from the new legal standard were the very occupations that legislative committees identified as having a history of worker misclassification.”

California granted numerous exemptions. For instance, an app-based dog-walking service received an exemption, but Uber and Postmates did not.

In June, an 11-judge en banc panel of the U.S. Court of Appeals for the Ninth Circuit sided with the state. Now, Olson’s appeal has been denied.

OOIDA, which filed an amicus brief in support of the gig workers’ case against California, was critical of the Ninth Circuit’s ruling.

“The Ninth Circuit’s en banc decision not only deepens a circuit divide regarding the standard for analyzing motions to dismiss equal protection claims, but it erodes the rational basis standard itself, transforming a court’s review into a rubber stamp for any distinctions a government can conceive,” OOIDA wrote in the amicus brief. “By allowing courts to consider … hypothetical justifications premised on facts outside or contrary to the complaint, the Ninth Circuit’s approach threatens to stop equal protection and due process claimants before they have any chance to offer evidence and argument demonstrating the irrationality or impossibility of a theoretical rational basis.”

Meanwhile, California voters approved Proposition 22, which blocks California from enforcing AB5 against gig drivers.

“As we explained in detail in our complaint, and a three-judge panel of the Ninth Circuit unanimously agreed, with AB5 the legislature unfairly targeted my clients out of animus rather than reason,” Theane Evangelis, an attorney for the plaintiffs, said in a statement. “Fortunately, in Proposition 22, California voters rejected AB5 because it threatened to take away the flexible work opportunities of hundreds of thousands of Californians.”

The Supreme Court receives about 7,000 petitions each year and typically grants 150 or fewer. LL