California’s Gig Economy Forecast: More Lawyers, More Rhetoric
Some things seem certain for gig economy companies like Uber in 2024: they will continue to accrue legal fees and continue to claim they are just “mobile application platforms” and emphatically not service providers. Let’s look at Uber as an example.
Even as it defends against multiple lawsuits brought by its drivers, Uber is now suing the State of California. Case No. 2:19-cv-10956.
The central issue in these lawsuits is whether Uber’s operations constitute a legitimate business model matching independent drivers to riders needing rides, or whether Uber is just a modern profit machine rebuilt from the age-old cogs and widgets of exploited workers.
In its suit, Uber claims that California’s Assembly Bill 5 (AB5) is unconstitutional. Effective January 1, 2020, AB5 was drafted to require gig-economy companies like Uber, DoorDash, and Lyft to reclassify drivers as employees rather than independent contractors. AB5 requires Uber and other gig-economy dependent companies to meet all three prongs of the “ABC Test” to legally continue classifying gig workers as independent contractors.
The lawsuit states that the law is arbitrary and irrational because it includes “nonsensical” exemptions for many other categories of workers. The complaint suggests the exemptions under AB5 are “so ill-defined or entirely undefined that it is impossible to discern what they include or exclude.” Thus, “there does not appear any reason why the California legislature would choose those carve-outs other than to respond to the demands of political constituents, [making] the law unconstitutional even under the minimal ‘rational basis’ standard of judicial review.” Instead, the complaint asserts the intent of the law is driven by “irrational animus” on the part of the California Legislature against the “on-demand economy,” meant to deprive workers of freedom and flexibility.
Whether or not you think the legal basis for Uber’s lawsuit has any merit – and many will argue it does not – by filing this lawsuit before AB5’s effective date, Uber essentially gives itself an alibi against later suggestions that its failure to reclassify drivers on January 1 is a willful violation of California labor laws. By claiming the law is unconstitutional, Uber is preemptively justifying its noncompliance.
It is also doing something else of significance.
Eventually, it will become critical for Uber, in fulfillment of the second prong of the ABC Test, to show that its drivers perform a type of work that is entirely outside Uber’s “usual course of business.” Thus, Uber’s lawsuit could also be understood as part of a strategic volley to reframe public and judicial perception of its business model.
Joining Uber as a plaintiff is Postmates, another gig-economy platform reportedly on the verge of an IPO. In addition, named plaintiffs include two drivers – or “app-based independent service providers” as they are termed in the complaint.
The complaint also rechristens the “gig economy” as the “on-demand economy,” declaring it “a free market system … with unprecedented independence and flexibility” for those “app-based independent service providers.”
Similarly, the complaint styles Uber as a “mobile application platform” rather than a ride-sharing service.
The first named plaintiff driver elects to drive for Uber because it allows her to be available to care for her husband who suffers from multiple sclerosis. The second named plaintiff can now attend his son’s little league games while making nearly twice as much money. Driving for Uber gives them the ability “to create their own financial stability.” In short, companies like Uber “empower” people to “work as much, or as little, as they want in order to accommodate family, social, professional, academic and other commitments.”
It would seem Uber is also setting the stage with this lawsuit to claim eventually that it meets all three parts of the ABC Test, including the second prong: namely, its drivers are performing work “outside the usual course” of Uber’s business. As framed in the complaint, the drivers are “independent providers” and Uber is just an app they use – one of many, in fact.
Robert Ottinger, Esq.
Robert Ottinger is an employment attorney who focuses on representing executives and employees in employment disputes. Before starting his firm, Robert slugged it out in courtrooms trying cases for the government. Robert served as a Deputy Attorney General for the California Department of Justice in Los Angeles and then as Assistant Attorney General for the New York Attorney General’s Office in Manhattan.
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