May 25, 2020

Uber and Postmates File Lawsuit Challenging California’s New Independent Contractor Law (AB-5)

On Monday, Uber, Postmates and two of their drivers filed a lawsuit in federal court in the Central District of California, seeking declaratory and injunctive relief and a determination that AB-5 is unconstitutional.

AB-5 is set to become effective on Wednesday, January 1st and will have a major impact on California’s freelance workforce as well as most other companies that have workers located in the state.  Among other things, AB-5 essentially prohibits companies, including Uber and Postmates, from continuing to classify their workers as independent contractors under California state law; further, the statute provides no guidance as to how these fundamental changes to California law are to be harmonized with other important areas of state and federal law, including state income tax and benefit plan participation.

Uber, Lyft and Doordash consider AB-5 to be a sufficiently significant threat to their businesses that they have pledged $110 million dollars to fund a voter initiative for the November 2020 ballot.

In the recent lawsuit, Uber and Postmates characterize AB-5 as “irrational and unconstitutional” as well as “vague and incoherent.” They allege that AB-5 will force some employers to “fundamentally restructure their business models” and could “force them to stop doing business in California.” This newly filed complaint isn’t the only challenge to AB-5, as it is already facing other pending lawsuits from freelance journalists as well as the trucking industry. The freelance journalists are challenging AB-5 on First Amendment grounds, as the law only allows a freelance journalist to write 35 articles per year for the same publication without becoming an employee. The trucking industry is challenging the law from yet another angle, arguing that AB-5 runs afoul of federal law which prohibits states from enforcing any law related to the price, route, or service of a motor carrier. With multiple challenges from different industries, we expect this battle to continue well into 2020.

Companies with workers in California should bear in mind that, even if one of the many challenges to AB-5 is successful, the “ABC” test codified in AB-5 would still be the default for (the much more limited) purposes of California’s wage order rules per the California Supreme Court’s decision in Dynamex. To hear more about Dynamex and the California worker classification regime prior to AB-5, listen to our podcast here.

To read more about AB-5, read our in-depth discussion here.

© 2020 Proskauer Rose LLP.

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About this Author

Anthony J Oncidi, Employment Attorney, Proskauer Rose Law Firm
Partner

Anthony J. Oncidi heads the Labor & Employment Law Group in the Los Angeles office. Tony represents employers and management in all aspects of labor relations and employment law, including litigation and preventive counseling, wage and hour matters, including class actions, wrongful termination, employee discipline, Title VII and the California Fair Employment and Housing Act, executive employment contract disputes, sexual harassment training and investigations, workplace violence, drug testing and privacy issues, Sarbanes-Oxley claims and employee raiding and trade secret protection....

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Kate Gold Labor and Employment Lawyer Proskauer
Partner

Kate Gold is a partner in the Labor & Employment Law Department in the Los Angeles office.

Kate has over 25 years of experience representing clients in a range of industries, across all areas of employment law.  An experienced litigator, she has represented clients in all types of employment-related suits, including class and collective actions, discrimination, retaliation and harassment, non-compete and wage/hour matters.  In addition to litigating, she conducts high-level workplace investigations and routinely counsels clients on matters involving the full range of state and federal employment issues.

Kate also represents clients in disputes involving  misappropriation of intellectual property and trade secrets, interference with contract, and unfair competition. Kate also counsels on classification of employees, employment issues in the context of purchase and sale of businesses, and non-competition agreements. Additionally, she negotiates and drafts executive employment and separation agreements and conducts training on sexual harassment prevention.

Kate received her B.A. and J.D. from the University of California, Berkeley.

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Employment lawyer, Proskauer, Ekaterina (Kate) Napalkova
Special Employee Benefits and Executive Compensation Counsel

Kate Napalkova is a special employee benefits and executive compensation counsel in the Tax Department and a member of the Employee Benefits & Executive Compensation Group.

Kate advises public and private companies, private investment funds, executives and boards on a broad range of compensation and employee benefits matters. Kate’s practice includes the compensation and employee benefits aspects of mergers and acquisitions, reorganizations, spin-offs, initial public offerings, financings and other corporate transactions. Kate’s practice further focuses on advising clients...

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Cole Lewis Employment Attorney
Associate

Cole Lewis is an associate in the Labor & Employment Department.

Cole graduated from UCLA School of Law, where he worked as a law clerk for Public Counsel of Los Angeles and advocated for benefit recipients in the Department of Public Social Services. He has also previously worked as a summer associate in Proskauer’s Labor & Employment Department.

Prior to law school, Cole received his Bachelor’s degree in Journalism at Indiana University, where he graduated cum laude.

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