Federal Courts Field Legal Challenges to California Law Expanding “Employee” Status

2020 has already proven to be an exciting year for the California employment bar, with two recent, high-stakes challenges to new legislation signed into law by Governor Gavin Newsom. The new law, A.B. 5, codifies and expands upon the three-prong “ABC test” adopted by the California Supreme Court in its landmark Dynamex v. Lee decision.  Rather than forcing plaintiffs to prove their status as “employees” entitled to protection under California’s wage-and-hour laws, under Dynamex – and now A.B. 5 – plaintiffs are presumed to be employees.  A defendant can rebut this presumption only by proving that:  (i) the plaintiff is free from control over the performance of her work; (ii) the type of work performed falls outside of the defendant’s usual course of business; and (iii) the plaintiff customarily performs the same kind of work she performs for the defendant.    

This radical shifting of the burden proof, perhaps combined with the expansion of the “ABC test” to states outside of California, has moved employers to challenge the legality of A.B. 5, making clear that they will not be forced to re-classify their workforces without  a fight.  Whether these employers will be successful remains an open question, as the challenges have thus far resulted in vastly different outcomes.  

First, on January 16, 2020, Judge Roger T. Benitez of the Southern District of California granted the California Trucking Association a preliminary injunction against the enforcement of A.B. 5 within the trucking industry.  Judge Benitez reasoned that, by effectively prohibiting motor carriers from hiring independent contractors, A.B. 5 is likely preempted by the Federal Aviation Administration Authorization Act, which bars state laws relating “to a price, route or service of any motor carrier . . . with respect to the transportation of property,” among other things.  Two weeks later, California’s Attorney General and the Teamsters informed Judge Benitez that they intend to seek review of his decision by the Ninth Circuit.

This week brought yet another challenge to A.B. 5, this time by Uber and Postmates, who also sought a preliminary injunction against the enforcement of the new law.  However, Uber and Postmates proved less successful than the California Trucking Association, with Judge Dolly M. Gee of the Central District of California denying their motion.  Judge Gee took a decidedly different approach than Judge Benitez, ruling that the State’s interest in protecting “potentially hundreds of thousands of California workers outweighs [Uber and Postmate’s] fear of being made to abide by the law.”