Court’s Ruling Suggests Fight Against A.B. 5 Could Face Uphill Battle

SAN FRANCISCO – In an order issued Monday with potential implications for the effort to challenge California’s Assembly Bill 5 (“A.B. 5”), California Superior Court Judge Ethan P. Schulman granted the California government’s motion for a preliminary injunction against ride-hailing companies Uber and Lyft, while denying the defendants’ motion for a stay of the action and denying other motions made by the defendants, as well.

The decision stems from an action filed by the Attorney General of California, along with the City Attorneys of Los Angeles, San Diego and San Francisco, seeking “injunctive relief, restitution and penalties” against Uber and Lyft, asserting that the companies have “misclassified their ride-hailing drivers as independent contractors rather than employees” in violation of A.B. 5.

Naturally, Uber and Lyft opposed the motion for a preliminary injunction and filed motions of their own, asking for a stay of the litigation pending the outcome of an appeal, a demurrer and motion to strike the complaint and a motion to compel arbitration. In his order issued Monday, Shulman denied all the defense motions and described the underlying arguments as “lacking merit.”

“None of Defendants’ pleas for further delay is persuasive,” Shulman wrote. “The district court denied Uber’s request for preliminary injunction, finding that Uber had not shown a likelihood of success or even raised serious questions as to the validity of A.B 5. That Uber and Lyft are attempting to persuade the voters to change that law, an effort that may or may not succeed, is no reason for this Court to refrain from deciding the issues currently before it.”

Addressing Uber’s various arguments, Shulman was most definitive when it came to the argument that A.B. 5 simply doesn’t apply to the companies – and highlighted the defendants’ various attempts to challenge the law as evidence the companies themselves sure seem to think the statute applies to them.

“Defendants argue first that A.B. 5 does not apply to them at all because they are not ‘hiring entities,’ or because they are exempt from that legislation,” Shulman wrote. “This argument files in the face of Uber’s conflicting claims in federal litigation and of Defendants’ concerted effort to overturn the statute. Within days of its enactment, Uber filed suit in federal court asserting that A.B. 5 unconstitutionally ‘targets’ its business, and, as discussed above, it has urged this Court to stay this litigation until its appeal in that case can be decided.”

Shulman also noted that the defendants are “major supporters of Proposition 22,” a measure on the upcoming 2020 ballot that would exempt Uber and Lyft from the enforcement of A.B. 5 by explicitly defining “app-based transportation (rideshare) and delivery drivers” as independent contractors.

“Defendants make no attempt to explain away these glaring inconsistencies,” Shulman wrote in is order. “Regardless, Defendants’ contention that they are not hiring entities within the meaning of the statute cannot be squared with the undisputed reality that they hire and contract with drivers.”

Shulman wrote that the question of whether Uber and Lyft drivers should be classified as employees or independent contractors is “governed by the so-called ABC test established by the (California) Supreme Court’s unanimous Dynamex decision, which A.B. 5 codified.”

“Under that test, a person providing labor or services for remuneration ‘shall be considered an employee rather than an independent contractor’ unless the hiring entity demonstrates that three conditions are satisfied,” Shulman wrote. “(A) The person is free from the control and direction of the hiring entity in connection the performance of the work, both under the contract for the performance of the work and in fact. (B) The person performs work that is outside the usual course of the hiring entity’s business. [and] (C) The person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.”

Shulman held that because the defendants “cannot possibly satisfy the ‘B’ prong of that test,” the likelihood that the California government will prevail in its claim that Uber and Lyft have misclassified their drivers is “overwhelming.” Because o f this overwhelming likelihood, “there is no need to address the other two prongs of the test,” Shulman wrote.

“It’s this simple: Defendants’ drivers do not perform work that is ‘outside the usual course’ of their businesses,” Shulman wrote. “Defendants’ insistence that their businesses are ‘multi-side platforms’ rather than transportation companies is flatly inconsistent with the statutory provisions that govern their businesses as transportation network companies, which are defined as companies that ‘engage in the transportation of persons by motor vehicle for compensation.’”

Shulman said the defendants’ argument also “flies in the face of economic reality and common sense.”

“(The argument) is irreconciliable with the Supreme Court’s directing Dynamex that California’s employee classification standard should be interpreted and applied broadly to include all persons who can reasonably be viewed as working in the hiring entity’s business,” Shulman added. “To state the obvious, drivers are central, not tangential, to Uber and Lyft’s entire ride-hailing business.”

Shulman stayed enforcement of his order for 10 days pending appellate review, saying he agreed with the defendants that a “brief stay is appropriate under the circumstances.”

While the defendants in the case obviously aren’t part of the adult entertainment industry, it’s not difficult to see how a court might take a similar view of the relationship between camming platforms and cam models – one of many reasons adult industry attorneys and advocates have been vocally opposed to A.B. 5 (and have expressed concern about the implications of the Dynamex decision) since it was first introduced.

YNOT will continue to monitor and report on this case and other A.B. 5-related developments.