A California labor law that reclassifies gig workers as employees rather than contractors will remain in place for now, as a federal judge yesterday rejected a request from Uber and Postmates to prevent the law from taking effect.
Gig economy companies are vociferously against California’s AB 5 law, and on Dec. 31 of last year, Uber and Postmates filed their complaint, which my colleague, Jenn Marston reported on at the time saying:
The complaint, filed Monday in a U.S. District Court, argues that AB 5 violates multiple clauses in the U.S. and California constitutions, including equal protection. The suit points to the “laundry list” of occupations exempted from AB 5, which includes travel agents, grant writers, construction workers, and salespeople, and argues that AB 5 is designed to stifle gig-economy companies and their workers.
According to The New York Times, Judge Dolly M. Gee agreed that Uber and Postmates could face harm from the law, but the public interest in having living wages and regulating employment were more in the public interest. Judge Gee did not rule on the merits of the case.
At stake is the underpinning of gig economy model, which uses less-expensive contractors and not full-time employees for jobs like doing the actual delivery of food. The question over the viability of this model will become increasingly important as delivery from third-party services is expected to make up 70 percent of all food delivery by 2022.
Companies like Uber, Postmates and DoorDash are all under increased pressure from investors to become profitable. Laws like California’s AB 5 certainly complicate that path to profitability.
Yesterday’s decision does not mean the fight over AB 5 is over. Postmates and Uber both said they are considering an appeal of the judge’s decision. In addition to this court case, DoorDash, Uber, and Lyft have pledged $90 million to get a 2020 ballot measure passed that would counteract AB 5.