A federal judge in Los Angles rejected a request by Uber and Postmates Inc to temporarily block enforcement of Assembly Bill 5, which aims to convert gig-economy workers from independent contractors to employees with benefits. Uber and Postmates didn’t ask the judge to shield other companies from the law.
US District Judge Dolly M Gee had signalled during a Feb 7 hearing that she would deny the preliminary injunction sought by Uber and Postmates.
Gee concluded in an order posted Monday that the public interest weighs “in favour of permitting the state to enforce this legislation”, while acknowledging the companies’ claim that it poses “irreparable harm” for them.
The status of drivers for the companies is critical to the companies’ business models, and is also of keen interest to potential investors. Postmates said last February that it had filed confidentially for an initial public offering. Since then, the company hasn’t moved ahead publicly with an IPO.
Uber’s US$8.1 billion IPO in May was the largest of the year in the US. Its shares have sunk 11% since then. Lyft Inc, which raised US$2.34 billion in March, has fallen 25% from its offer price.
In the next phase of the case the companies will try to convince Gee that AB 5 violates guarantees of equal protection under the federal and state constitutions. But the judge said in her ruling it’s unlikely that Uber and Postmates will prevail on the merits of their claims.
California Attorney General Xavier Becerra argued the constitutional claims will fail because the state legislature has a prerogative to stop the gig economy’s exploitation of workers.
“State legislators had the opportunity to expand benefits for hundreds of thousands of independent workers in California, a step Uber has been advocating for and one that other states already have taken,” Uber said in a statement.
“Instead, they passed AB 5 using a biased and overtly political process that ignored the voices of the workers most affected by the law and granted preferential treatment to an arbitrary group of industries.”
As multiple court battles play out, gig companies are working on other fronts to rein in the law. Uber, Lyft, Postmates, Instacart and DoorDash have pledged US$110 million for a ballot measure to change AB 5.
Signed by California Governor Gavin Newsom in September, AB 5 says workers can generally only be considered contractors if they perform duties outside the usual course of a company’s business. Uber filed its suit Dec 30, two days before AB 5 took effect.
The case is Olson v State of California, 2:19-cv-10956, US District Court, Central District of California (Los Angeles).