Cal. AG Files Enforcement Action Against Uber and Lyft under AB-5

In 2018, the California Supreme Court’s Dynamex decision redefined the definition of employee v. independent contractor through an “ABC test” followed by many states.  Last September, California Governor Newsom signed AB-5 which codified the Dynamex decision and went into effect on January 1, 2020.

The titans of the “Gig Economy” have fought AB-5 throughout the process and have refused to comply.  In January, Postmates and Uber filed a federal challenge to the law in federal court in Los Angeles (Olson, et al. v. State of California, No. 19-cv-10956 (C.D. Calif. Dec. 30, 2019) in which they contend that they are “not hiring entities under AB 5 and can establish that app-based independent service providers are not employees under the ABC test” adopted by Dynamex.

In addition, Uber, Lyft and DoorDash have funded a $90 million effort for a ballot measure to reclassify their workers under AB-5 which has collected enough signatures to qualify for the November 2020 ballot (although the signatures are still being verified).

On May 5th, California’s Attorney General Xavier Becerra, joined by the City Attorneys of Los Angeles, San Diego and San Francisco, filed an enforcement action against Uber and Lyft under AB-5 in San Francisco County Superior Court.   The Complaint was critical of the companies’ refusal to comply with the law:

6. But rather than own up to their legal responsibilities, Uber and Lyft have worked
relentlessly to find a work-around. They lobbied for an exemption to A.B. 5, but the Legislature declined. They utilize driver contracts with mandatory arbitration and class action waiver provisions to stymie private enforcement of drivers’ rights. And now, even amid a once-in-a-century pandemic, they have gone to extraordinary lengths to convince the public that their unlawful misclassification scheme is in the public interest. Both companies have launched an aggressive public relations campaign in the hopes of enshrining their ability to mistreat their workers, all while peddling the lie that driver flexibility and worker protections are somehow legally incompatible.

. . . 8. As one federal district judge recently observed: “[R]ather than comply with a clear legal obligation, companies like Lyft are thumbing their noses at the California Legislature . . . .” (Rogers v. Lyft (N.D. Cal. Apr. 7, 2020, No. 20-CV-01938-VC) ___ F.Supp.3d ___ [2020 WL 16484151, at *2].)

. . . 10. The time has come for Uber’s and Lyft’s massive, unlawful employee
misclassification schemes to end. The People bring this action to ensure that Uber and Lyft ride-hailing drivers—the lifeblood of these companies—receive the full compensation, protections, and benefits they are guaranteed under law, to restore a level playing field for competing businesses, and to preserve jobs and hard-won worker protections for all Californians.

The enforcement action seeks an injunction against further violations but also that the defendants compensate their employees as required by AB-5 and a civil penalty of up to $2,500 per violation.  This would be a huge hit to both companies.

Attorney General Becerra responded to the PR campaign waged by the defendants, by releasing a short video explaining why the state was acting.