California Seeks To Toss AB-5 Suit

California has sought to dismiss a suit aiming to block AB-5, a new law aimed at regulating the so-called “gig economy.” AB-5 reclassifies gig economy workers from independent contractors to employees; however, the plaintiffs claim that the bill violates both the California and United States constitution. The original complaint was filed by Lydia Olsen, a gig economy worker, who was joined by Uber, Postmates and another individual plaintiff, Miguel Perez. They sought an injunction, which the court recently denied.

Now, California has sought to fully dismiss the case, arguing that since the court rejected the Plaintiffs’ preliminary injunction, the court should dismiss the case. California stated that it enacted the bill to fight against worker misclassification and to ensure true independent contractors had the same rights and protections as employees. In this suit, Uber, Postmates and two individuals “seek to invalidate and enjoin enforcement of AB 5, alleging a lengthy list of federal and state constitutional violations.” The “Plaintiffs claim that the law unfairly ‘targets’ online companies, discriminates on the basis of occupation, and prevents the pursuit of a chosen occupation.”

California stated that these claims do not have any merit. California states that AB-5 will help workers, their families, and the economy, adding that new and growing areas have the most misclassification. “Recent research also supports the prevalence of misclassification and finds some of the highest misclassification rates in the economy’s growth industries, including home care, janitorial, trucking, construction, hospitality, security, and the app-based ‘on demand’ sector.”

Plaintiffs argue that AB-5 does not accomplish what California intended for it to do. Instead, they define it as “vague” and “incoherent,” and as a result of the legislation, the companies must drastically restructure their business model, thus putting a strain on their business. While there are exemptions, the gig economy and app-based businesses are not exempt. The plaintiffs also argued that AB-5 violates the California and federal constitutions.

California argued that the case should be dismissed because Plaintiffs failed to plead adequate facts to support the claims. California claimed that “Plaintiff’s Equal Protection Claims fail because AB 5 is rationally related to a legitimate government interest,” such as protect workers, strengthen the middle class, fight against income inequality, which “is a rational basis for any ostensible targeting of gig economy employers and workers.” Further, “state law benefits from a presumption of validity,” as a result, the Plaintiffs must show that this is not the case, which they failed to do.

In response to the plaintiffs’ allegations, California claimed that this bill does not single out app-based companies, and added that the plaintiffs fail to provide specifics in the legislature that target them. The state determined that workers in “digital applications” and “gig economy” industries faced the same amount of misclassification risk as other works, and therefore, deserved to be protected.

The plaintiffs have until March 12 to file an opposition to the motion, after which the defendants must reply by March 26.  A hearing on the motion will then be held in April.