U.S. Appeals Court upholds rights for gig-economy workers

By Sheri Williams

In June, the Ninth U.S. Circuit Court of Appeals upheld a California law that grants employee rights to gig workers in industries including delivery drivers and ride-sharing services, ruling that it is constitutional.

“Today the Ninth Circuit en banc affirmed that AB 5 is in fact a Constitutional law. This is a victory for all workers in the state, but especially the chronically misclassified workers in rideshare and delivery jobs,” said Lorena Gonzalez, principal officer of the California Labor Federation and author of AB 5. “Now, we must continue to seek ways to enforce this law.”

Assembly Bill 5 was passed in 2019 and reclassified many independent contractors as employees, giving them the benefits and rights of full-time workers. It codified the “ABC” test which is now used to determine which workers are true independent contractors and which workers should be classified as employees.

Under the ABC test, an employer must decide whether the worker should be classified as an independent contractor or an employee using three criteria. In order to be an independent contractor, the worker must be “free from the control and direction of the hirer in connection with the performance of the work,” according to the court. The worker must also perform work that “is outside the usual course of the hiring entity’s business.” Lastly, the worker must be “customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

Ruling in a lawsuit brought by two of those so-called gig economy companies, Postmates and Uber, the 11-judge panel of the Ninth Circuit of Appeals said that California was not unfairly singling out certain companies or industries when it passed the law. Those companies argued that because other gig companies such as dog-walking service Wag! did not have to comply with the law, it should be ruled invalid.

A related case is expected to be heard by the California Supreme Court related to Proposition 22.

Labor allies were quick to applaud the Ninth Circuit’s decision.

“Today’s decision upholding AB 5’s protections for app-based drivers is a big win for California workers,” said California Attorney General Rob Bonta. “AB 5 was enacted by the California legislature to address a systemic problem of businesses improperly classifying their workers as independent contractors to avoid providing financial benefits and legal protections owed to employees. Today the Ninth Circuit correctly and unanimously rejected Uber and Postmates’ attempt to invalidate the application of AB 5 to the app-based driving sector. The California Department of Justice will continue to stand up for the rights of workers to receive the benefits and protections to which they are legally entitled.”

Assembly Bill 5 was a tough fight when it was considered by the Legislature, stemming from the demand that gig workers receive fair wages, employee rights and the right to form a union.

“That AB 5 may be under-inclusive because it does not extend the ABC test to every industry and occupation that has historically contributed to California’s misclassification woes does not render it unconstitutionally irrational,” the court said in its decision.