{"id":1520,"date":"2024-06-12T12:25:26","date_gmt":"2024-06-12T16:25:26","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=1520"},"modified":"2024-06-12T12:25:26","modified_gmt":"2024-06-12T16:25:26","slug":"ninth-circuit-rejects-challenge-to-a-b-5-and-holds-that-disparate-treatment-of-gig-workers-is-justified-by-californias-interest-in-curbing-independent-contractor-misclassification","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2024\/06\/12\/ninth-circuit-rejects-challenge-to-a-b-5-and-holds-that-disparate-treatment-of-gig-workers-is-justified-by-californias-interest-in-curbing-independent-contractor-misclassification\/","title":{"rendered":"Ninth Circuit Rejects Challenge To A.B. 5, And Holds That Disparate Treatment Of Gig Workers Is Justified By California\u2019s Interest In Curbing Independent Contractor Misclassification"},"content":{"rendered":"

\"\"<\/a>By Eden E. Anderson, Rebecca S. Bjork, and Gerald L. Maatman, Jr.<\/strong><\/p>\n

Duane Morris Takeaways: <\/strong>\u00a0On June 10, 2024, the Ninth Circuit issued its en banc opinion<\/a> in Olson, et al. v. State of California, et al., Case No. 21-55757, 2024 WL 2887392<\/em> (9th Cir. June 10, 2024).\u00a0 The en banc panel affirmed the dismissal of the Plaintiffs\u2019 lawsuit challenging the constitutionality of A.B. 5, which mandates application of the \u201cABC test\u201d for independent contractor classification to workers in certain industries.\u00a0 The Ninth Circuit found no equal protection violation in applying the \u201cABC test\u201d to certain gig workers, yet applying the easier-to-satisfy \u201cBorello\u201d test to other gig workers.\u00a0 <\/em><\/p>\n

California employers in industries subject to A.B. 5 and its more rigorous \u201cABC test\u201d for independent contractor classification should take heed of the Olson ruling.\u00a0 <\/em><\/p>\n

Case Background <\/strong><\/p>\n

Postmates, an application-based goods delivery platform, Uber, and two individual workers for those companies sued the State of California and Attorney General of California seeking declaratory and injunctive relief based on the allegation that A.B. 5 violates the Equal Protection Clauses, the Due Process Clauses, and the Contract Clauses of the United States and California Constitutions.\u00a0 They sought a preliminary injunction to prevent enforcement of A.B. 5.<\/p>\n

Enacted in 2018, A.B. 5 codified and expanded upon the California Supreme Court\u2019s holding in Dynamex Operations W., Inc. v. Superior Court<\/em>, 416 P.3d 1 (Cal. 2018), which held that the \u201cABC test\u201d applies in determining the proper classification of workers as independent contractors or employees under California wage orders.\u00a0 Under A.B. 5, subject to specified exemptions, the \u201cABC test\u201d applies beyond the wage orders to other labor and employment legislation, including workers\u2019 compensation, unemployment insurance, sick and family leave, and disability insurance.<\/p>\n

The \u201cABC test\u201d is, as its name suggests, is comprised of three parts, with the burden being on the hiring entity to show, A: the worker is free from the control and direction of the hirer, B: the worker performs work outside the usual course of the hiring entity\u2019s business, and C: the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.\u00a0 This test is more challenging to meet that the traditional \u201cBorello<\/em>\u201d test that was applied prior to A.B. 5\u2019s enactment, which considers a larger number of factors, with the focus being the hiring entity\u2019s right to control the manner and means of the work.<\/p>\n

One statutory exemption from A.B. 5\u2019s coverage applies to \u201creferral agencies,\u201d i.e.,<\/em> businesses that provide clients with referrals to service providers.\u00a0 However, A.B. 2257, enacted in 2019, modified this exemption to carve-out referral agencies, like Uber and Postmates, that provide delivery, courier, or transportation services.\u00a0 Consequently, categories of referral agencies are treated differently under the law, with referral agencies like Postmates and Uber subject to the \u201cABC test,\u201d and referral agencies that provide other services, for example, Wag!, a dogwalking service, and TaskRabbit, which provides on-demand help with daily tasks, subject to the easier-to-meet \u201cBorello<\/em>\u201d test.\u00a0 It was that differential treatment that Plaintiffs alleged was unconstitutional.<\/p>\n

The district court denied Plaintiffs\u2019 motion for preliminary injunctive relief, concluding that A.B. 5 was rationally related to a legitimate state interest.\u00a0 While Plaintiff\u2019s\u2019 appeal of that ruling was pending, California voters approved Proposition 22, a ballot initiative that classifies rideshare and deliver drivers as independent contractors, notwithstanding A.B. 5.\u00a0 Thereafter, the district court dismissed the lawsuit, and Plaintiffs\u2019 appealed that ruling too.<\/p>\n

A three-judge panel of the Ninth Circuit reversed, in part, concluding that the district court erred by dismissing the Equal Protection claims.\u00a0 However, the Ninth Circuit then granted rehearing en banc.<\/p>\n

The Ninth Circuit\u2019s En Banc Opinion <\/strong><\/p>\n

The Ninth Circuit first noted, as some readers may be wondering, that Proposition 22 did not moot the appeal because Postmates and Uber were still facing a number of claims for alleged violations of A.B. 5 that predated Proposition 22\u2019s passage.<\/p>\n

The Ninth Circuit then addressed the Equal Protection claim.\u00a0 It explained that, even if it were true that the application-based business models of Postmates, Uber, Wag!, and TaskRabbit were similar, there were rational reasons for applying a different worker classification test to workers that provide delivery, courier, or transportation services.\u00a0 Such disparate treatment was rational because Postmates and Uber were seemingly perceived by the legislature as \u201csubstantial contributors\u201d to the ills that A.B. 5 sought to remedy, including worker misclassification and \u201cerosion of the middle class,\u201d and were pioneers in the on-demand-app-based industry whose business models others might try to replicate.\u00a0 Id<\/em>. at p. 21-22.\u00a0 The Ninth Circuit further emphasized that, for a \u201creferral agency\u201d like Wag! or TaskRabbit to be exempt from A.B. 5, it needs to satisfy multiple requirements, so the availability of the referral agency exemption remains \u201climited.\u201d\u00a0 Id<\/em>. at 23.<\/p>\n

The Ninth Circuit further opined that, even though A.B. 5 contains many exemptions, it is entirely rational for the ABC test to apply in some contexts, and for the Borello <\/em>test to apply in others, because the legislature supposedly wanted the ABC test to apply in industries where worker misclassification was historically problematic (and not because certain industries successfully pushed through legislative exemption).<\/p>\n

Implications Of The Decision <\/strong><\/p>\n

We anticipate U.S. Supreme Court review will be sought.<\/p>\n

The Olson<\/em> opinion deals a blow to efforts to challenge A.B. 5\u2019s enforcement.\u00a0 California employers in industries subject to A.B. 5 must satisfy the more rigorous ABC test to establish they have properly classified workers as independent contractors, whereas employers in industries not subject to A.B. 5 bear a lesser burden under the Borello<\/em> test.\u00a0 That differential treatment is, in the Ninth Circuit\u2019s view, constitutionally sound.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Eden E. Anderson, Rebecca S. Bjork, and Gerald L. Maatman, Jr. Duane Morris Takeaways: \u00a0On June 10, 2024, the Ninth Circuit issued its en banc opinion in Olson, et al. v. State of California, et al., Case No. 21-55757, 2024 WL 2887392 (9th Cir. June 10, 2024).\u00a0 The en banc panel affirmed the dismissal … <\/p>\n

Continue reading “Ninth Circuit Rejects Challenge To A.B. 5, And Holds That Disparate Treatment Of Gig Workers Is Justified By California\u2019s Interest In Curbing Independent Contractor Misclassification”<\/span><\/a><\/p>\n","protected":false},"author":583,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[41],"tags":[],"ppma_author":[30],"class_list":["post-1520","post","type-post","status-publish","format-standard","hentry","category-arbitration-issues"],"authors":[{"term_id":30,"user_id":583,"is_guest":0,"slug":"classactiondefense","display_name":"Class Action Defense","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2020\/10\/dmlogo.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1520","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/users\/583"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/comments?post=1520"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/1520\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/media?parent=1520"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/categories?post=1520"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/tags?post=1520"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/ppma_author?post=1520"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}