An 11-judge panel will hear California’s appeal of the AB5 case known as Olson, a suit that earlier this year led to a victory for Uber and Postmates in their battle against the state’s independent contractor classification law.
In a brief order issued Monday, the Court of Appeals for the 9th Circuit vacated the three-judge appellate decision from March that partly reversed a lower court decision in the Western District of California.
The order issued by the Court of Appeals did not say what the judges’ vote was in favor of accepting the state’s request for a hearing before a full panel of 11 randomly selected judges. It did say arguments would be presented in San Francisco during the week of March 18, 2024.
The lower court had rejected all the claims made by Uber (NYSE: UBER) and Postmates. Postmates had been a separate delivery company until it was acquired by Uber in 2020, after the initial lawsuit was filed. The named plaintiffs in the case, Lydia Olson and Miguel Perez, were drivers for Uber and Postmates.
The decision handed down by a three-judge panel in March was notable primarily for its reasoning that Uber and Postmates had been denied equal protection of the law in the process that led to the California approval of AB5, state legislation that required companies that hire independent contractors to reclassify them as employees. Equal protection of the law was the only claim by Uber and Postmates that the appellate panel backed; it supported the lower court rejection of other arguments.
The panel cited the statements of then-Assemblywoman Lorena Gonzalez, now a state labor leader but the key driver in turning AB5 into law, as evidence that the move to more tightly define when a worker can legitimately be considered an independent contractor was an effort targeted at gig drivers like those at Uber.
Among those many statements, the original complaint in the case filed in late 2019 cited a Los Angeles Times story that quoted Gonzalez as saying she “is open to changes in the bill next year, including an exemption for musicians — but not for app-based ride hailing and delivery giants.” Many of those exemptions have since been granted, either in AB5 or follow-up legislation, AB 2257.
And in the complex legal landscape over AB5, the March appellate court decision putting the Olson case back into the lower court was then cited by the California Trucking Association and the Owner-Operator Independent Driver Association in a revised filing over its own ongoing legal battle against AB5. The CTA/OOIDA argument also cited statements by Gonzalez that the plaintiffs said showed the California trucking industry was targeted along with gig drivers.
(On Wednesday, two days after the en banc decision was handed down, attorneys for state Attorney General Rob Bonta and the Teamsters, which is an intervenor allied with the state, filed a document with the lower court in the CTA/OOIDA case noting the Ninth Circuit’s decision. The argument that the earlier decision regarding equal protection of the laws, which the CTA and OOIDA cited after that decision came down, could possibly be impacted by vacating the three-judge panel’s decision.)
AB5 is built on the foundation of the ABC test found in the Dynamex state court decision from April 2018 regarding worker misclassification. The ABC test sets up a three-pronged test to help regulators and courts determine if a worker can legitimately be considered independent or should be considered an employee.
For both the trucking and gig worker sectors, the B prong has the greatest disruptive potential. It says a worker can be considered independent if he or she “performs work that is outside the usual course of the hiring entity’s business.” But if the “usual course” of business is trucking or moving people around in personal cars, hiring outside workers to do that can create a conflict with the B prong.
The decision by the 9th Circuit Court of Appeals to hear the Olson case en banc comes as the trucking industry awaits the outcome of a request by CTA and OOIDA for a new injunction to block AB5 from being implemented in the state.
That lawsuit was filed in late 2019 in the Southern District of California by CTA (OOIDA was added as a plaintiff later) and on New Year’s Eve of that year, Judge Roger Benitez handed down an injunction blocking its implementation in trucking because of concerns AB5 might have been preempted by a federal law, the Federal Aviation Administration Authorization Act. AB5 went into effect for the rest of the state on New Year’s Day 2020.
Benitez’s injunction was overturned by a three-judge appellate court panel in April 2021. Enforcement was stayed while the CTA took the case to the Supreme Court for review, which was not granted.
AB5 was implemented in trucking. But the CTA case, which was not withdrawn but instead was sent back to the original court, now lives on in the same courtroom before Benitez, who heard arguments for a new injunction in November. California’s trucking sector awaits word on that decision.
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