Two companies sue California for gig economy law

Uber and courier Postmates are suing California for its new labor law that they say is in breach of the constitution.

Tina Bellon had the news for Reuters:

Ride-hailing company Uber Technologies Inc and courier services provider Postmates Inc asked a U.S. court to block a California labor law set to go into effect on Wednesday, arguing the bill violates the U.S. Constitution.

In a lawsuit filed in Los Angeles federal court on Monday, the companies and two app-based drivers said the law, which would make it harder for gig economy companies to qualify their workers as independent contractors rather than employees, was irrational, vague and incoherent.

The office of California Attorney General Xavier Becerra said in a statement on Monday it was reviewing the complaint. The bill, called AB5, faces multiple legal challenges.

The law was signed by California Governor Gavin Newsom in September and has garnered national attention, largely owing to the size of California’s workforce and the state’s leadership role in establishing policies that are frequently adopted by other states.

Carolyn Said from the San Francisco Chronicle reported:

AB5 is “irrational and unconstitutional,” contends a lawsuit, Olson vs. California, filed Monday in U.S. District Court in Los Angeles. The plaintiffs — Uber, Postmates, an Uber driver and a Postmates courier — say they seek to defend the “fundamental liberty to pursue their chosen work as independent service providers and technology companies in the on-demand economy.” AB5 violates due process by infringing on this right, the lawsuit says.

The suit claims that AB5 targets “modern app-based” ride and delivery companies, even while exempting dozens of other professions, thus violating equal protections.

“There is no rhyme or reason to these nonsensical exemptions,” it says. The law also violates the constitutionally protected contracts clause, the suit says, as it would “impermissibly upend hundreds of thousands of valid, existing contracts between on-demand workers” and companies.

The lawsuit is the latest salvo by gig-economy companies that say AB5 could devastate them by removing the flexibility that their business models depend on. AB5 supporters say that gig companies that hire workers as independent contractors are denying them the protections and benefits of employee status, as well as pinching pennies on labor costs.

Engadget’s Jon Fingas wrote:

When approached by Engadget for comment, Uber and Postmates pointed to posts from Olson and Perez explaining their reasons for backing the lawsuit. Both of them touted the flexibility of their contractor status as key to maintaining their lifestyles, while Olson claimed that the notion of gig workers being exploited was an “insult to our intelligence” and ignored the on-the-ground reality. Uber also said it was relating the case to another lawsuit from freelance journalists mounting a similar constitutional challenge.

In the past, companies dependent on gig workers have frequently argued that laws like this hurt flexibility for workers by potentially mandating work hours and schedules. They’ve called for a “thoughtful solution” (as Lyft put it) that strikes a balance between that flexibility and labor benefits. Uber also argued that AB5 doesn’t necessarily apply — it claimed that its main business is the ridesharing platform it provides, not the actual rides, and thus that drivers should remain contractors.

Not that the government is likely to be easily swayed. AB5 supporters have contended that companies like Uber and Postmates use that contractor status as a way to dodge common labor obligations and reduce pay. And while there are advantages to the flexibility of contract work, AB5 backers have argued that workers who depend on gig work for their main livelihoods frequently struggle to make a living or cope with emergencies. Gonzales and allies see this as an attempt to restore labor rights eroded in the gig economy era, and they’re unlikely to concede willingly.