With California’s Assembly Bill 5 (AB 5) law set to go into effect on January 1, Uber and Postmates have filed a complaint alleging that the new law, which will make it harder for gig economy companies to classify workers as independent contractors, violates constitutional rights.
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.
“[AB 5] irreparably harms network companies and app-based independent service providers by denying their constitutional rights to be treated the same as others to whom they are similarly situated,” the lawsuit says.
The complaint alleges that AB 5 also violates due process clauses of the Fourteenth Amendment, the Ninth Amendment, and the contracts clause of Article I. It asks for a preliminary injunction against AB 5 while the lawsuit is considered.
AB 5, which expands on a California Supreme Court decision from 2018 known as Dynamex, was signed into law in September by California governor Gavin Newsom. Under the new law, workers are considered employees of a business unless the employer can show they meet certain criteria that would classify them as independent contractors.
The new law would require gig-economy companies like Uber, Postmates, and other food delivery services to give drivers and couriers health insurance, paid time off, and other perks not typically only given to full-time employees.
It would also undercut the entire model on which these companies are built — a model many already call unsustainable for the long term. By some accounts, third-party services will make up 70 percent of all restaurant delivery orders by 2022. But these companies have yet to turn a profit. If AB 5 causes a ripple effect across other states who would sign similar laws into place, it could further erode the possibility of profitability ever happening.
DoorDash, Uber, and Lyft have pledged $90 million to get a 2020 ballot measure passed that would counteract AB 5.
