Date: Monday, May 15, 2023
A cascade of filings in the “other” AB5 case earlier this week includes one from 15 state attorneys general representing mostly states with Democratic governors, displaying the deep divide between political parties over the question of independent contractor status.
The other AB5 case is known as Olson, after the lead plaintiff, Lydia Olson. But the heavy hitters among the plaintiffs are Uber (NYSE: UBER) and Postmates. The state of California is the defendant.
That case was filed against the legality of AB5 just two days before it went into effect on Jan. 1, 2020, and a day before the then year-old California Trucking Associations case against the state on the grounds that AB5 was in conflict with a federal law was granted a preliminary injunction that for 2 ½ years kept AB5 away from the state’s trucking sector. But AB5 is now in place and the original case that generated the injunction is back at the lower court level.
While so much of the attention in AB5 litigation has been on the CTA case, the Olson plaintiffs’ request for a preliminary injunction was first rejected by a federal district court. But it then won a partial victory when a federal appeals court ruled in March that the U.S. District Court for the Central District of California improperly dismissed the Olson claims that the patchwork of exceptions to AB5 granted by the state, including surgeons, translators and more than 100 occupations in between, denied Uber and Postmates equal protection of the law.
The state, on appeal, asked for an en banc hearing in an April 28 filing. The friend of the court briefs filed by the attorneys general this week ask for an en banc hearing of the full 9th Circuit “to correct the mistaken and harmful panel decision.”
The partisan divide on display in the attorneys general filing is concurrent to the debate in Washington over the nomination of Julie Su as secretary of labor and her role in the support and enforcement of AB5. (She is currently acting secretary.) Su was secretary of labor in California when AB5 was first implemented and her role and support has become a key issue.
AB5 contains the ABC test to guide courts and regulators in determining whether a worker is an employee or a genuine independent contractor. The B prong is particularly problematic for trucking. That section says a worker is independent if he or she “performs work that is outside the usual course of the hiring entity’s business,” a problem for a trucking company that hires independent truckers.
Although there is no ABC test at the federal level, and the proposed Department of Labor rule on independent contractor status specifically notes that an ABC test was rejected in its drafting, that has not stopped the nomination of Su to become entangled with the mix of arguments over independent contractor status, AB5 and the ABC test. The divide on her nomination is mostly straight down party lines, with Republicans opposed. That divide beyond the borders of the state is now evident in the filing by the attorneys general.
The basis for the appellate court’s decision that app-based workers had been denied the equal protection of the laws was based largely on two factors: the long list of occupations exempted from AB5 as well as the statements of then-Assemblywoman and AB5 leading force Lorena Gonzalez, which the plaintiffs said showed her efforts were singling out their occupation.
It is that argument that the attorneys general push back against in their support of the request for a full en banc hearing.
The attorneys general described AB5 as a “run-of-the-mill economic regulation” and said the step the appellate court took was “unusual.”
“If allowed to stand, the panel’s decision will invite endless litigation over even the most mundane economic legislation, on subjects ranging from tax laws to worker protection,” the attorneys general wrote. “The opinion opens the door for any regulated entity to pass the pleading stage based on nothing more than an allegation that (a) the entity was subject to regulation while entities in other sectors were not subject to regulation and (b) a legislature made negative comments about the entity,” a reference to Gonzalez.
The attorneys general who filed the amici brief are from Arizona, Washington, Connecticut, Hawaii, Illinois, Maine, Maryland, Michigan, Massachusetts, Minnesota, Nevada and Vermont (which both have a Republican governor but a Democratic attorney general), New Jersey, New York, Oregon, the District of Columbia and the Northern Mariana Islands. In their filing the attorneys general said their states “have strong interests in preserving well-established Equal Protection jurisprudence that applies rational-basis review to economic legislation and avoids unnecessary and wasteful litigation.” By contrast, they said, the appeals court “abandoned core Equal Protection principles.”
Where the two cases, CTA and Olson, come together is how they both bring in Gonzalez to the litigation. It was the Olson attorneys who first cited Gonzalez’s words as evidence that AB5 was not intended to be a wide-ranging law, that it was targeted. When the appeals panel agreed, the CTA went back to its case — which is being litigated now in front of the same judge that granted the preliminary injunction in 2020 — and amended its complaint to say that yes, Gonzalez was unfair to trucking and singled it out.
Among the arguments made by the attorneys general:
- State economic laws “receive substantial deference” under equal protection law. Even where a law results in “some inequality … legislatures are presumed to have acted within their constitutional power,” the attorneys general said, citing an earlier precedent.
- The appellate panel “contradicts” earlier precedents in the 9th Circuit. It cited a precedent that said a legislature can take “piecemeal steps” even if it creates “some disparate treatment of affected parties.”
- As to the role of Gonzalez, who is not mentioned by name in the attorneys general filing, the attorneys general wrote that “the panel’s analysis suggests that legislators may not speak about or pass laws regulating industries they believe to be creating economic or social problems. But that is precisely legislators’ job.”
Among the other parties that all filed amicus briefs on Monday, in what appears to be a coordinated effort, are the California Labor Federation (which Gonzalez now heads), the Teamsters and a nonspecific “workers rights organizations,” with Veena Dubal, a professor at the University of California College of Law San Francisco and well-known activist, as one of the lead names on that brief.
The state of California is a defendant in the CTA and Olson cases, in which plaintiffs are seeking to block AB5 in one way or another. But in the case surrounding Prop 22, which was a referendum approved Election Day 2020 that gave app-based drivers such as those at Uber an exemption from AB5’s implementation, the state is defending the results of that vote.
The plaintiffs in that case are some individual drivers (the lead plaintiff is named Hector Castellanos) and unions, including the Service Employees International Union. They initially successfully argued that Prop 22 was unconstitutional at a lower state court before that decision was overturned, leaving those drivers, for now, exempt from AB5.
As the representative of the voters, the state of California is a defendant in that case, in the role of needing to argue that Prop 22 is constitutional, which would have the effect of barring AB5 from app-based drivers.
Su’s role in AB5 and the ABC test was criticized this week by Todd Spencer, president of the Owner-Operators Independent Drivers Association.
In a recent article in Land Line magazine, published this week, Spencer said of Su that as labor secretary, “California provided woefully inadequate clarity for owner-operators to determine how AB5 would affect their operations. Owner-operators, who represent a large portion of America’s trucking industry, remain confused and fearful about the future of their businesses in California because the state has never provided any concise guidance to clarify compliance or enforcement.”