Yesterday, a federal appeals court defeated a lawsuit brought by the popular gig economy companies Uber and Postmates against California’s independent contractor restrictions.

The 11-judge panel of the 9th Circuit of Appeals decided that California did not single out and target gig-economy companies when it passed Assembly Bill (AB 5) in 2019. Instead, it claimed that AB5 changed regulations for all of the state’s independent contractors. As we know, that change was for the worst. AB5 destroyed opportunities for thousands of independent workers and that hardship continues.

Uber and other gig economy companies plan to keep fighting to overturn AB5. Meanwhile, independent contractors nationwide face an uncertain future as nationalized restrictions on freelancing and self-employment are now in place. 

What Happened

Uber and Postmated sued the state of California over the passage of AB5. The reclassification of the drivers on their apps as employees would undermine their business model, exponentially raising business costs and potentially driving them out of the state. The companies claimed that AB5 treated their gig drivers differently than even other gig workers.

A lower court eventually agreed, finding that lawmakers acted with animus against Uber, Postmates, and other ridesharing and delivery services compared to how they treated other app-based companies. 

Meanwhile, in 2020, the question of whether drivers should be classified as independent contractors was posed to California voters through Proposition 22. Voters overwhelmingly said ‘yes!’ Proposition 22 faces legal challenges from labor unions, the driving force behind AB5 and other independent contractor reclassification efforts.

Four years later, this federal court overturned the lower court’s decision. In the Court’s opinion, Judge Jacqueline H. Nguyen explained that “the legislature perceived transportation and delivery companies as the most significant perpetrators of the problem it sought to address—worker misclassification.” Thus, the Court defended the state’s unequal treatment of companies within the same industry.

The brainchild of AB5, former legislator and labor boss Lorena Gonzalez was quick to tout this decision, which saved her baby, calling it “a victory for all workers in the state, but especially the chronically misclassified workers in ride-share and delivery jobs.”

Meanwhile, one of the plaintiff’s lawyers sounded a more somber tone, pointing to the negative impacts the decision will have on opportunities for Californians.

As the LA Times reports

Theane Evangelis, an attorney for the companies, said AB5 had “threatened to take away the flexible work opportunities of hundreds of thousands of Californians,” but voters had “rejected” such regulations with the proposition.

However, a spokesperson for Uber, Noah Edwardsen, explained that the decision “does not change the status of the law in California in any way.”

What This Means

California is in a mess thanks to AB5. The law was intended—as this Court decision underscores—to hammer specific, big gig economy companies with new regulations on their independent workforce.

Not only have gig economy workers been affected, but hundreds of other occupations have been drawn into the chaos. Workers who have been self-employed professionals, small business owners, and others with side gigs have lost incomes, lost contracts, and lost opportunities. People in organized groups or with big platforms, such as some musicians and writers, were able to secure exemptions from AB5, but many other hardworking individuals across the state have been deprived of the ability to work independently.

According to analysis by the Mercatus Center, self-employment plummeted 10.5% after AB5 was implemented, and overall employment fell by 4.4%. AB5 has been devastating to many individuals who do not want to be employees of their clients. Whether to be a caregiver to children or aging parents or for their own health conditions, these individuals—many of whom are women—want flexibility.

We have not stopped telling the story of how AB5 harmed Californians through our Chasing Work series.

Bottom Line

This fight to secure independent contracting opportunities for rideshare drivers, gig-economy workers, and all self-employed or freelance workers in California and nationwide continues.