Uber's Top Lawyer Vows Fight as California Embraces Sweeping New Labor Rules
Legal threats loom as worker classification legislation, Assembly Bill 5, heads to the governor's desk. The new rules could upend how the gig economy is structured.
September 11, 2019 at 06:21 PM
5 minute read
Gov. Gavin Newsom was poised Wednesday to sign new worker-classification rules that threaten to upend the gig economy, raising fresh criticism from the top lawyer at Uber Technologies and setting the stage for a likely wave of new lawsuits across industries.
After hours of debate Tuesday night and Wednesday morning, state lawmakers sent Newsom Assembly Bill 5, a measure that will codify a landmark California Supreme Court ruling last year. That decision made it more difficult for gig companies not to classify their workers as employees entitled to wider protections such as minimum wage and benefits. Newsom has said he will sign the bill.
"Today the Legislature made it clear: we will not in good conscience allow free-riding businesses to profit off depriving millions of workers from basic employee rights that lead to a middle-class job," said the bill's author, Assemblywoman Lorena Gonzalez, D-San Diego. "It's our duty to look out for working men and women, not Wall Street and their get-rich-quick IPOs."
In a call with reporters less than an hour after AB 5 passed in the Assembly, Uber chief legal officer Tony West said the company has no immediate plans to reclassify its drivers as employees and instead will consider legal and political alternatives, including a potential 2020 ballot measure.
The state Supreme Court's ruling and the new law, which will take effect Jan. 1, do not automatically give on-demand workers employee status. Instead, employers must apply a new three-prong test outlined by the California Supreme Court—in the case Dynamex Operations West v. Superior Court—to determine if they can continue treating workers as independent contractors.
"Having to take a harder test does not determine the outcome of the test," said West, who insisted that Uber can meet the new legal threshold to continue to classify its drivers as independent contractors.
That stance will almost assuredly invite lawsuits from Uber workers, who are widely covered by arbitration agreements, and California city attorneys, who were empowered by late amendments to the bill to seek injunctive relief from companies that don't comply with the law.
Gonzalez told the San Francisco Chronicle on Wednesday that she added provisions giving city attorneys the power to ensure the law's enforcement.
"It's insulting for these companies, these billion-dollar companies, to walk into an office and say, 'We don't care what the law is,'" she said.
West said Uber did not oppose AB 5 until the language empowering city attorneys was added to the bill late last week. Uber spent more than $181,000 lobbying on the bill and other matters in the second quarter this year, according to state records.
|How Companies Might Sue
West did not say which legal options the ride-hailing company may pursue, although at least one observer said the many industry carve-outs in AB 5 for lawyers, doctors, fishermen and other professionals may provide a litigation target.
"One potential avenue may be an equal protection theory—the idea that given the exemptions that have been established that there's not a basis for treating them equally," said William Gould, a professor emeritus at Stanford Law School.
Gould said the bill may also run afoul of federal law governing the trucking industry. AB 5 does grant exemptions to subcontractors who provide construction trucking services and it does specify that truck owners can work as employees of trucking companies.
Sean Gentry, an employment litigation partner with Ad Astra Law Group in San Francisco, said legal challenges to the legislation based on industry-specific exemptions would probably be "an uphill climb."
"The Labor Code and wage orders have always contained specific nuances for different industries," he said.
Despite the criticism of the Dynamex ruling and AB 5, they do provide employer- and worker-craved clarity that an earlier worker classification standard did not, he said. "In the short term you'll see a lot of heartache," Gentry said. "But in the long run it offers more clarity."
Uber, Lyft and DoorDash have contributed a combined $90 million to a campaign account that would fuel a 2020 ballot initiative to create a new classification for gig workers, one that West said would offer benefits and minimum pay without providing employee status.
Newsom told The Wall Street Journal on Wednesday that he has continued to negotiate with the on-demand companies in hopes of avoiding an initiative fight next year.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View All'Transforming Children Into ATMs'?: Roblox, Epic Games Sued for Allegedly Fueling Addictive Behavior in Minors
Amazon's Audible Hit With Privacy Class Action Over Use of Tracking Pixels
SAG-AFTRA Union Health Plan Slammed With Data Breach Class Actions in Wake of Phishing Attack
Justices to Decide if Fuel Industry Can Sue Over California’s EV Rules
Trending Stories
- 1Breon Peace, U.S. Attorney for the Eastern District of New York, Announces Upcoming Resignation
- 2Georgia Law Firm's Longtime Office Manager Charged With Theft Of IOLTA Funds
- 3Juries Can Use Slo-Mo to Evaluate Videos, NJ Justices Say
- 4An AI Danger to Minors: Two Texas Families Want to Shut Down Character.AI
- 5T14 Sees Black, Hispanic Law Student Representation Decline Following End of Affirmative Action
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250