9th Circuit weighs claims that Uber was targeted by Calif. contractor law – ET Auto


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Several U.S. appeals court judges on Wednesday seemed skeptical of a bid by Uber and subsidiary Postmates to revive a challenge to a California law that could force the companies to treat drivers as employees rather than independent contractors who are typically less expensive, though it was unclear how the full court could rule.

An 11-judge en banc panel of the 9th U.S. Circuit Court of Appeals in San Francisco heard arguments in Uber’s appeal of a judge’s ruling that said the company failed to show that the 2020 law known as AB5 improperly singled out app-based transportation companies while exempting many other industries.

Employees are entitled to the minimum wage, overtime pay, reimbursements for expenses and other protections that are not extended to independent contractors. Uber, Postmates and similar services typically treat workers as contractors in order to control costs.

AB5 raised the bar for proving that workers are truly independent contractors, requiring a company to show that workers are not under its direct control or engaged in its usual course of business and operate their own independent businesses.

California lawmakers exempted many jobs and businesses from AB5’s reach, including “referral agencies” that connect workers and customers, but explicitly did not exempt app-based transportation and delivery services.

The law has spurred legal challenges from freelance workers and trucking companies, which so far have failed. The U.S. Supreme Court has declined to hear at least two of those cases.

Wednesday’s arguments came as the California Supreme Court is considering the state’s appeal of a ruling that revived a ballot measure passed by nearly 60% of state voters in 2020 that exempts app-based transportation services such as Uber from AB5 if they provide certain benefits to drivers.

While most of the eleven 9th Circuit judges on the en banc panel spoke, it was not clear how many of them were leaning. But some of the judges asked pointed questions of Uber’s lawyer, Theane Evangelis, that suggested they were not convinced that the company should be able to pursue the case.

Circuit Judge Mary Murguia said it was well established that legislators can make distinctions between different groups even when they are “underinclusive and overinclusive.”

“Even if the line drawing in AB5 and its amendments is not perfect, I’m trying to figure out why that is fatal to the legislation,” Murguia said.

Circuit Judge Gabriel Sanchez similarly noted that various industries where worker misclassification is allegedly widespread were also explicitly included in AB5’s scope. Those industries include agricultural labor, retail, logging, in-home care, janitorial services and many others.

“Why should we agree with the premise that it was meant specifically to carve out certain companies … when it reached a much broader group of industries?” Sanchez asked Evangelis.

Evangelis told the court that the ample number of exemptions in the law undermined its stated purpose of addressing worker classification. And she said there was enough evidence showing that legislators targeted Uber and similar services to allow the case to go to trial.

“The state is allowed to invoke any legitimate purpose, but we get to test that purpose,” she said.

A three-judge 9th Circuit panel had revived the case last year, reversing a judge who had dismissed the lawsuit. The panel said the “piecemeal fashion” in which legislators made exemptions to AB5 supported Uber’s claims that the law violated its rights to equal protection under the U.S. Constitution.

The en banc court voted to rehear the case in December. None of the three judges on the original panel are on the en banc panel.

Samuel Harbourt of the California Attorney General’s office, who argued for the state, told the court on Wednesday that it was reasonable for lawmakers to exempt industries where there had been little history of worker misclassification. He said Uber had not met the high bar of showing that there was no conceivable legitimate basis for the law.

“Plaintiffs’ argument would threaten to cast a cloud of legal uncertainty over the validity of economic legislation at every level of government,” he said.

  • Published On Mar 22, 2024 at 12:40 PM IST

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