Uber Lawsuit News and Updates

Uber Lawsuit News: Inside Uber’s Lawsuit Calling California Worker Rights Bill ‘Unconstitutional’

January 7, 2020
Author: Daniel Gala

Since Uber, Postmates, and two individual plaintiffs filed on December 30 a lawsuit calling California’s new worker rights law—which took effect January 1, 2020—“unconstitutional”, the case has received national, and even international, media attention.  

However, lacking from many of these reports has been a detailed analysis of exactly why the plaintiffs say the law, known as AB 5 after its number in the California state assembly, is unconstitutional, or even to which constitution(s) they are referring.  

To that end, TheLawFirm.com presents this closer look at the legal nuts and bolts of Uber’s latest lawsuit, one that seeks to undermine a law that specifically was passed as a challenge to the business models of gig-economy employers like the embattled ridesharing giant.  

“Plaintiffs Lydia Olson and Miguel Perez (together, ‘Individual Plaintiffs’), and Postmates Inc. (‘Postmates’) and Uber Technologies, Inc. (‘Uber’) (together, ‘Company Plaintiffs’) filed this Complaint for declaratory, injunctive, and other relief determining that California Assembly Bill 5 (‘AB 5’)—a recently enacted statute that becomes effective on January 1, 2020—is unconstitutional,” the new federal lawsuit, filed in the Central District of California, begins. “AB 5 violates the Equal Protection and Due Process Clauses of the Fourteenth Amendment to the United States Constitution, the Ninth Amendment to the United States Constitution, and the Contracts Clause of Article 1 of the United States Constitution, as well as the Equal Protection Clause, Inalienable Rights Clause, Due Process Clause, Baby Ninth Amendment, and Contracts Clause of the California Constitution.”  

We will examine each of these arguments in turn.  

  First & Second Counts: United States Constitution and California Constitution – Equal Protection Clauses  

The first and second counts of Uber and Postmates’ lawsuit argue that California’s AB 5 violates the equal protection clauses of the US and California constitutions because, they contend, it unfairly treats companies like theirs differently than other companies without a rational basis for doing so.    

“AB 5 violates the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution because it draws classifications between network companies and non-network companies without a rational basis for distinguishing between the two groups,” the lawsuit argues.  

The supposed distinction between “network companies” and “non-network companies” is one drawn by the plaintiffs in the lawsuit itself, where it is described that so-called network companies “connect consumers requesting certain services with independent providers of those services.” According to plaintiffs, these kinds of companies “are sometimes referred to as ‘app-based platforms,’ ‘network companies,’ or ‘platform companies.’”  

Ratified in 1868, the Fourteenth Amendment to the US Constitution was passed in the aftermath of the Civil War as part of an effort by the federal government to enforce and maintain the civil rights advances obtained through that bloody struggle, particularly for African-Americans. In relevant part, Section 1 of the Fourteenth Amendment declares that “No state shall…deny to any person within its jurisdiction the equal protection of the laws.”  

In the 150 years of jurisprudence that has followed, courts have interpreted the Equal Protection Clause to apply with varying levels of scrutiny depending on the right or rights on which the state action is alleged to infringe. For example, legal precedent now has established that state actions impacting certain “fundamental” rights are to be approached with “strict scrutiny” by the courts, whereas state actions involving other purportedly “lesser” rights are not subject to such stringent second-guessing by the judiciary.  

Uber and its fellow plaintiffs argue that the rights at issue under AB 5 are of the “fundamental” variety and therefore should be subject to the court’s highest level of scrutiny.  

“Strict scrutiny review applies because AB 5 is designed to burden, and if enforced against independent service providers like Individual Plaintiffs and network companies such as Company Plaintiffs in a manner consistent with the sponsors’ stated intent would burden, the fundamental rights of network companies and workers to pursue their chosen profession and determine when and how they earn a living,” the lawsuit argues.  

In arguing that there is no rational basis to support AB 5’s alleged disparate treatment of certain companies and workers, Uber and the other plaintiffs point to the numerous exemptions, exceptions, and carve-outs contained within the legislation.  

“The manner in which AB 5’s exemptions were created further confirms that the statute violates the Equal Protection Clause,” the lawsuit says. “Many exemptions resulted from ‘back door’ deals and political favors to industry groups—i.e., not a valid legislative purpose.”  

[Despite decrying this “back door” process, Uber and Postmates concede that they attempted to take part in the supposed scheme but were blocked from doing so: “Platform companies also sought an express exemption as the statute was moving through the California legislature, but were denied exemptions.”]  

Therefore, lacking a valid legislative purpose, the plaintiffs argue, the only possible explanation for the law is state lawmakers’ irrational, and unconstitutionally expressed, animosity toward these self-described “network companies.”  

“Not only is animus toward the on-demand economy the only possible explanation for the express exemption of a litany of similarly situated companies but not platform companies, but it is also the actual explanation for the scheme,” the lawsuit claims. “The public record is filled with statements by California legislators who voted for the bill, including the sponsor of AB 5, attacking platform companies specifically, targeting such companies in their support of AB 5, and stating their view that AB 5 will stop the purported ‘unscrupulous’ business practices of such companies.”  

In making the argument that the only possible explanation for lawmakers’ having passed AB 5 is an irrational hatred for companies like Uber, the plaintiffs ignore a number of more feasible explanations, also supported by the record, such as the possibility that lawmakers had a legitimate legislative interest in protecting the rights of gig-economy workers in their districts.  

Count Three: California Constitution – Inalienable Rights Clause  

The plaintiffs’ third count is based on an alleged violation of the Inalienable Rights Clause of the California Constitution, which is contained in Article 1, Section 1.  

“All people are by nature free and independent and have inalienable rights,” the clause states, as quoted in the complaint. “Among these are enjoying and defending life and liberty, acquiring, possessing, and protecting property, and pursuing and obtaining safety, happiness, and privacy.”  

Uber, Postmates, and the two individual plaintiffs contend that AB 5 violates the Inalienable Rights Clause as it applies to them because it is a state action that irrationally interferes with their ability to pursue their own economic interests.  

“AB 5 violates [the Inalienable Rights Clause] because it infringes the rights of network companies and independent service providers to pursue their chosen profession, which is an essential component of liberty, property, happiness, and privacy,” the lawsuit alleges. “On-demand work is an occupation, even if it is a specific or particular one. AB 5 infringes the right to pursue this occupation.”  

Counts Four, Five, & Eight: US Constitution and California Constitution – Due Process Clause

Three counts of the 49-page lawsuit deal with alleged violations of the due process clauses of the US and California constitutions, with counts four and five specifically dealing with the right to pursue one’s chosen occupation.  

Again, Uber and the other plaintiffs point to public statements by backers of the legislation and the list of industries and professions expressly exempted from AB 5 as evidence in support of its claims.  

“The public record is replete with evidence showing that California legislators supported AB 5 in an effort to isolate and harm platform companies, if not put them out of business,” the lawsuit claims in count four, concluding later, “The malicious and arbitrary purpose of the statute—combined with the back-room dealing that led to its laundry list of irrational exemptions—creates a ‘wholly arbitrary’ standard in violation of due process.”    

Counts Six & Seven: US Constitution and California Constitution – Ninth Amendment / Baby Ninth Amendment  

Counts six and seven of the lawsuit challenging the constitutionality of AB 5 rely on the assertion that the court should recognize as among the “fundamental rights” a right “to work on one’s own terms.”  

“The language and history of the Ninth Amendment reveal that the Framers of the Constitution believed that there are additional fundamental rights, protected from government infringement, which exist alongside those fundamental rights specifically mentioned in the first eight constitutional amendments,” the lawsuit argues. “The right to work on one’s own terms—as an independent service provider, rather than an employee—is one of those fundamental rights.”  

Despite the novel nature of the plaintiffs’ claim that the supposed “right” to work as an independent contractor should be elevated to among the “fundamental rights” enshrined in the US and California constitutions, they offer no legal precedent or other specific facts to support this argument, instead incorporating the remainder of the complaint.  

  Counts Nine & Ten: US Constitution and California Constitution—Contract Clause  

The lawsuit next contends that AB 5 violates the contract clauses of the US and California constitutions. In its federal iteration, this clause states, “No state shall…pass any…Law impairing the Obligation of Contracts,” as quoted by plaintiffs.  

Essentially, Uber and its fellow plaintiffs argue that their constitutionally protected ability to contract would be hindered under AB 5 because the companies already have negotiated binding contracts with their workers, and these contracts call on the workers to be classified as independent contractors.  

“Company Plaintiffs are parties to valid contracts with the independent service providers who operate on their platforms, including Individual Plaintiffs,” the lawsuit says. “These contracts establish that the workers are independent contractors for the purposes of their work found by using the app-based platforms of the Company Plaintiffs.”  

It continues: “If AB 5 were enforced consistent with the sponsors’ intent in a way that required Company Plaintiffs to reclassify independent service providers who use their apps as employees, this would invalidate these existing contracts between Company Plaintiffs and the independent service providers who operate on their platforms, including Company Plaintiffs’ contracts with Individual Plaintiffs.”  

While plaintiffs contest that AB 5 would “impose new obligations under the existing contracts” that the parties themselves “did not voluntarily agree to undertake,” one could think of numerous regulatory and other examples in which state actions have had analogous impacts on existing contractual relationships but have not been found to violate either of the constitutions’ contract clauses.  

Count Eleven: Injunctive Relief  

The eleventh and final count of Uber’s lawsuit calls on the court to grant injunctive relief, that is, to legally prevent AB 5 from taking effect. Uber and the other plaintiffs request both preliminary and permanent injunctive relief, meaning that they are requesting that the court both place AB 5 on hold pending the outcome of this litigation and stop AB 5 from taking effect at any point in the future.  

“Defendants should be preliminarily and permanently enjoined from enforcing AB 5 against Company Plaintiffs,” the lawsuit’s final count argues. “If enforcement of AB 5 were to force the reclassification of Individual Plaintiffs from independent contractors to employees, Independent Plaintiffs would suffer severely and irreparably.”  

The individual plaintiffs, both gig-economy workers, “both rely heavily on this independence and flexibility for their income, and because they care for ailing and struggling family members. Absent an injunction, they will suffer severe irreparable harm.”  

The same goes for Uber and Postmates, the company plaintiffs, according to the lawsuit, which argues these businesses “would incur immediate injury for which there is no adequate remedy at law, including because the statute violates their constitutional rights, threatens their business models, and forces them to incur unrecoverable administrative and compliance costs,” adding, “Constitutional violations constitute per se irreparable harm.”  

Conclusion  

Throughout their lawsuit, Uber, Postmates, and the two individual plaintiffs rely heavily on two pieces of evidence in making their case that AB 5 violates a number of provisions under the state and federal constitutions.  

First, Uber and its fellow plaintiffs repeatedly point to the “public record” as supposed evidence that “hostility towards the on-demand economy held by Assemblywoman [Lorena] Gonzalez and many of her colleagues in the California legislature ultimately led to the passage of AB 5,” arguing that this animosity—and not a true desire to protect the rights of vulnerable workers, many of whom are Assemblyperson Gonzalez’s constituents—was the real motive behind the law.  

Second, Uber further argues that this supposed motive of animosity to the “on-demand economy” and companies like Uber and Postmates is laid bare by the large and, in the plaintiffs’ view, arbitrary number of exceptions under the law, which they say proves that the law is merely a means of targeting their business models to the exclusion of others.  

Whether the courts ultimately will find the claims of unconstitutionality asserted in the lawsuit to be supported on such relatively thin evidence remains to be seen, but Uber and the other plaintiffs consistently ignore the fact that the very state legislators who passed AB 5 and the governor who signed it into law are each elected officials who hold their positions subject to the will of their constituents, not multi-billion-dollar transnational corporations.    

  Sources:

United States District Court Central District of California Western Division. (30 December 2019). Complaint For Violation of Federal and California Constitutional Rights, Declaratory, Injunctive, and Other Relief. Demand For Jury Trial. Case No. 2:19-cv-10956. Lydia Olson; Miguel Perez; Postmates Inc.; and Uber Technologies, Inc., Plaintiffs, v. State of California; Xavier Becerra, in his capacity as Attorney General of the State of California; and “John Doe,” in his official capacity, Defendants  

United States Constitution. (1868). Fourteenth Amendment