throbber
Case 2:19-cv-10956-DMG-RAO Document 52 Filed 02/10/20 Page 1 of 24 Page ID #:1783
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 19-10956-DMG (RAOx)
`
`
`Title Lydia Olson, et al. v. State of California, et al.
`
`
`
`
`
`Date February 10, 2020
`
`Page 1 of 24
`
`
`
`
`Proceedings: IN CHAMBERS - ORDER RE PLAINTIFFS’ MOTION FOR
`PRELIMINARY INJUNCTION [14]
`
`
`On January 8, 2020, Plaintiffs Lydia Olson, Miguel Perez, Postmates Inc. (“Postmates”),
`
`and Uber Technologies, Inc. (“Uber”)1 filed a Motion for Preliminary Injunction requesting that
`the Court enjoin the enforcement against Plaintiffs, pending final judgment, of any provision of
`California Assembly Bill 5 2019 (“AB 5”), a recently enacted law pertaining to the classification
`of employees and independent contractors. [Doc. # 14.] The Motion has been fully briefed, and
`the Court held a hearing on February 7, 2020. [Doc. ## 21, 23.]2 For the reasons stated below,
`the Court DENIES Plaintiffs’ Motion.
`
`
`I.
`FACTUAL AND PROCEDURAL BACKGROUND3
`
`
`California courts have long grappled with the challenges of defining the line between an
`
`employee and an independent contractor. Two years ago, in its unanimous decision in Dynamex
`Operations W. v. Superior Court, 4 Cal. 5th 903 (2018), the California Supreme Court described
`
`
`1 The Court refers to Olson and Perez collectively as the “Individual Plaintiffs” and Uber and Postmates
`collectively as the “Company Plaintiffs.”
`
` 2
`
` On February 4, 2019, individuals described as “California On-Demand Contractors” Keisha Broussard,
`Daniel Rutka, Raymond Frazier, and Lamar Wilder filed a brief as amici curiae in support of Plaintiff’s Motion for
`Preliminary Injunction. [Doc. # 27.] The next day, the Chamber of Commerce of the United States of America,
`Engine Advocacy, and TechNet also filed a brief as amici curiae in support of Plaintiff’s Motion. [Doc. # 44.]
`
` 3
`
` The following facts are based on judicially noticeable documents and the sworn declarations Plaintiffs
`submitted in support of their Motion, not on the unverified allegations in Plaintiffs’ Complaint. See, e.g., K-2 Ski
`Co. v. Head Ski Co., 467 F.2d 1087, 1088 (9th Cir. 1972) (“A verified complaint or supporting affidavits may afford
`the basis for a preliminary injunction[.]”); 11A Charles Alan Wright & Arthur R. Miller, Federal Practice and
`Procedure § 2949 (3d ed. 2019) (“Evidence that goes beyond the unverified allegations of the pleadings and motion
`papers must be presented to support or oppose a motion for a preliminary injunction.”).
`
`CV-90
`
`
`CIVIL MINUTES—GENERAL
`
`Initials of Deputy Clerk KT
`
`Present: The Honorable DOLLY M. GEE, UNITED STATES DISTRICT JUDGE
`
`
`
`KANE TIEN
`Deputy Clerk
`
`Attorneys Present for Plaintiff(s)
`None Present
`
`
`
`
`
`
`
`NOT REPORTED
`Court Reporter
`
`Attorneys Present for Defendant(s)
`None Present
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 52 Filed 02/10/20 Page 2 of 24 Page ID #:1784
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`CIVIL MINUTES—GENERAL
`
`
`Date February 10, 2020
`
`Page 2 of 24
`
`Case No. CV 19-10956-DMG (RAOx)
`
`
`Title Lydia Olson, et al. v. State of California, et al.
`
`
`
`
`
`
`
`the distinction between an independent contractor and employee—and the importance of that
`distinction—in this way:
`
`
`Under both California and federal law, the question whether an individual worker
`should properly be classified as an employee or, instead, as an independent
`contractor has considerable significance for workers, businesses, and the public
`generally. On the one hand, if a worker should properly be classified as an
`employee, the hiring business bears the responsibility of paying federal Social
`Security and payroll taxes, unemployment insurance taxes and state employment
`taxes, providing worker’s compensation insurance, and, most relevant for the
`present case, complying with numerous state and federal statutes and regulations
`governing the wages, hours, and working conditions of employees. The worker
`then obtains the protection of the applicable labor laws and regulations. On the
`other hand, if a worker should properly be classified as an independent contractor,
`the business does not bear any of those costs or responsibilities, the worker
`obtains none of the numerous labor law benefits, and the public may be required
`under applicable laws to assume additional financial burdens with respect to such
`workers and their families.
`
`Id. at 912–13 (footnote omitted). The California Supreme Court noted that “[t]he basic objective
`of wage and hour legislation and wage orders is to ensure that such workers are provided at least
`the minimal wages and working conditions that are necessary to enable them to obtain a
`subsistence standard of living and to protect the workers’ health and welfare.” Id. at 952. It
`therefore adopted a “very broad definition of the workers who fall within the reach of the wage
`orders.”4 Id.
`
`That broad definition is known as the “ABC” test, a standard used in numerous
`
`jurisdictions in different contexts to determine a worker’s classification. Id. at 916. Under the
`ABC test, a worker is considered an employee unless the hiring entity establishes that the worker
`(a) is “free from the control and direction of the hirer in connection with the performance of the
`work, both under the contract for the performance of such work and in fact”; (b) “performs work
`that is outside the usual course of the hiring entity’s business”; and (c) is “customarily engaged
`in an independently established trade, occupation, or business of the same nature as the work
`performed for the hiring entity.” Id. at 916–17. Dynamex applied the ABC test to all employers
`and workers covered by California Industrial Wage Commission (“IWC”) wage orders. Id. at
`964.
`
`4 “In California, wage orders are constitutionally-authorized, quasi-legislative regulations that have the
`force of law.” Id. at 914.
`
`CV-90
`
`
`CIVIL MINUTES—GENERAL
`
`Initials of Deputy Clerk KT
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 52 Filed 02/10/20 Page 3 of 24 Page ID #:1785
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`CIVIL MINUTES—GENERAL
`
`
`Date February 10, 2020
`
`Page 3 of 24
`
`Case No. CV 19-10956-DMG (RAOx)
`
`
`Title Lydia Olson, et al. v. State of California, et al.
`
`
`
`
`
`
`
`On September 18, 2019, Defendant the State of California enacted AB 5, which codifies
`Dynamex’s holding and adopts the ABC test for all provisions of the California Labor Code, the
`Unemployment Insurance Code, and IWC wage orders, with numerous exemptions. See A.B. 5,
`Ch. 296, 2019–2020 Reg. Sess. (Cal. 2019); Cal. Lab. Code § 2750.3. For such statutory
`exemptions, AB 5 provides that the multifactor test of independent contractor status established
`in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989),
`remains in effect. See Cal. Lab. Code § 2750.3(b)–(h). The listed occupations, industries, or
`types of work relationships are subject to additional criteria in order to be exempted from
`application of the ABC test and include, among others: licensed professionals such as doctors
`and lawyers, commercial fishermen, contractors and subcontractors in the construction industry,
`business-to-business service providers, travel agents, graphic designers, freelance writers,
`aestheticians, and business entities providing referred services as home cleaners, dog walkers, or
`tutors. See id. Under AB 5, certain city attorneys may bring injunctive actions, and reclassified
`employers may be subject to pre-existing Labor and Unemployment Insurance Code provisions
`penalizing some violations as misdemeanors. See id. § 2750.3(j); A.B. 5, Ch. 296, 2019–2020
`Reg. Sess. (Cal. 2019).
`
`On December 30, 2019, Plaintiffs filed the instant lawsuit alleging that AB 5 violates the
`
`U.S. and California Constitutions and seeking declaratory, injunctive, and other relief from the
`State and Defendant Xavier Becerra, in his capacity as Attorney General of California. [Doc.
`# 1.] Postmates and Uber are both headquartered in San Francisco, California, and are
`commonly referred to as “on-demand economy,” “network economy,” “platform,” or “gig
`economy” companies that use technology to respond to a customer’s immediate or specific need.
`See Compl. at ¶ 3; Andres Decl. at ¶ 3 [Doc. # 17]; Rosenthal Decl. at ¶ 5 [Doc. # 18]; McCrary
`Decl. at ¶ 14 n.1 [Doc. # 19].
`
`Postmates provides and maintains an online marketplace and mobile platform (the
`“Postmates App”) that connects local merchants, consumers, and drivers5 to facilitate the
`purchase, fulfillment, and—when applicable—delivery of goods from merchants (oftentimes
`restaurants) to consumers. Andres Decl. at ¶4. When consumers place orders of goods for
`delivery through the Postmates App, nearby drivers receive a notification and can choose
`whether to pick up and complete the requested delivery. Id. at ¶¶ 4–5. According to Postmates,
`more than 300,000 drivers in California currently make deliveries through the Postmates App,
`and “the vast majority” of those drivers “provide delivery services only intermittently and for
`
`5 Postmates’ Director of Trust and Safety and Insurance Operations describes drivers as “independent
`contractor couriers.” See, e.g., Andres Decl. at ¶ 2. The Court has not been asked to decide whether Postmates’
`couriers are independent contractors or employees under AB 5, Dynamex, Borello, or any other law, and opts to
`describe the couriers as “drivers.”
`
`CV-90
`
`
`CIVIL MINUTES—GENERAL
`
`Initials of Deputy Clerk KT
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 52 Filed 02/10/20 Page 4 of 24 Page ID #:1786
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`CIVIL MINUTES—GENERAL
`
`
`Date February 10, 2020
`
`Page 4 of 24
`
`Case No. CV 19-10956-DMG (RAOx)
`
`
`Title Lydia Olson, et al. v. State of California, et al.
`
`
`
`
`
`
`
`short periods of time.” Id. at ¶ 6. For drivers, there are no set schedules or requirements for
`minimum hours or deliveries. Id. at ¶ 7. Drivers use their own vehicles and determine their own
`appearance and routes, and they may do other work for other employers. Id. at ¶¶ 9–11. Drivers
`who wish to make deliveries through the Postmates App must sign the “Fleet Agreement,” which
`currently explains, inter alia, that the driver is “an independent provider of delivery services”
`and that Postmates and the driver do not have an employer-employee relationship. Id. at ¶¶ 12–
`15.
`
`
`Uber provides at least two “digital marketplaces” to connect individual consumers with
`those willing to service them—the UberEats mobile platform (the “UberEats App”) and the Uber
`rideshare mobile platform (the “Uber Rides App”). Rosenthal Decl. at ¶¶ 6–8. The UberEats
`App, like Postmates, connects local merchants, consumers, and drivers to facilitate customers’
`food orders for delivery. Id. at ¶ 8. The Uber Rides App has different interfaces for customers
`seeking a ride (“riders”) and for drivers seeking riders. Id. at ¶¶ 7, 12–15. According to Uber,
`more than 395,000 drivers in California have used Uber platforms to provide services in the year
`beginning October 1, 2018. Id. at ¶ 9. Drivers can choose when and where they drive and accept
`or reject requests as they see fit. Id. at ¶¶ 14–15, 18–19. To use the driver version of the Uber
`Rides app, drivers must agree to Uber’s Technology Services Agreement (the “Rasier Services
`Agreement”), which provides, inter alia, that Uber is “a technology services provider that does
`not provide transportation services” and that the drivers operate as independent contractors, not
`employees. Id. at ¶¶ 20–29. UberEats drivers must also agree to a Technology Services
`Agreement (the “Portier Services Agreement”) with similar provisions. Id. at ¶¶ 30–39.
`
`
`Plaintiff Lydia Olson is a driver for Uber, and Plaintiff Miguel Perez is a driver for
`Postmates and, occasionally, Uber Rides and UberEats. Olson Decl. at ¶ 5 [Doc. # 15]; Perez
`Decl. at ¶¶ 2, 4–5 [Doc. # 16]. Olson owns a consulting business and at times takes care of her
`husband, who suffers from multiple sclerosis. Olson Decl. at ¶¶ 2–3. She attests that she
`intentionally chooses to work as an independent contractor for the flexibility and autonomy, as
`well as to help stabilize her fluctuating income. Id. at ¶¶ 4–5, 8–12. Similarly, Perez attests that
`he chose on-demand work to avoid driving a truck during the graveyard shift, to take on more
`family responsibilities, and to increase his income. Perez Decl. ¶¶ 3–8, 18. Neither Individual
`Plaintiff wants to be an employee of Uber or Postmates, and both express concerns about the
`grave impact of AB 5 on their lives. Id. at ¶¶ 19–20; Olson Decl. at ¶¶ 10, 12.
`
`AB 5 went into effect on January 1, 2020. On January 8, 2020, Plaintiffs filed the instant
`
`Motion requesting that this Court enjoin Defendants from enforcing AB 5 against Company
`Plaintiffs.
`
`
`CV-90
`
`
`CIVIL MINUTES—GENERAL
`
`Initials of Deputy Clerk KT
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 52 Filed 02/10/20 Page 5 of 24 Page ID #:1787
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 19-10956-DMG (RAOx)
`
`
`Title Lydia Olson, et al. v. State of California, et al.
`
`
`
`
`
`Date February 10, 2020
`
`Page 5 of 24
`
`
`
`II.
`JUDICIAL NOTICE
`
`
`Both sides seek judicial notice of various documents. Federal Rule of Evidence 201
`
`permits a court to take judicial notice of facts not subject to reasonable dispute and “capable of
`accurate and ready determination by resort to sources whose accuracy cannot reasonably be
`questioned.” Campbell v. PricewaterhouseCoopers, LLP, 642 F.3d 820, 824 n.3 (9th Cir. 2011)
`(citing Fed. R. Evid. 201(b)). Defendants seek judicial notice of:
`
`
`(1) The Order Denying Temporary Restraining Order in American Society of Journalists
`and Authors, Inc. v. Becerra, No. CV 19-10645-PSG (C.D. Cal. Jan. 3, 2020);
`(2) The October 29, 2019 initiative submitted to the California Attorney General’s Office
`entitled “the Protect App-Based Drivers and Services Act.” [Doc. # 21.]
`
`
`Plaintiffs seek judicial notice of:
`
`(1) Plaintiffs’ Motion for Provisional Relief in Regents of University of California v. U.S.
`Department Homeland Security, No. CV 17-05211-WHA (N.D. Cal. Jan. 9, 2018);
`(2) Brief of State Amicus Curiae in International Refugee Assistance Project v. Trump,
`857 F.3d 554 (4th Cir. 2017);
`(3) Order Granting Temporary Restraining Order, California Trucking Association v.
`Becerra, No. CV 18-02458-BEN (BLMx) (S.D. Cal. Dec. 31, 2019);
`(4) Order Granting Preliminary Injunction, California Trucking Association v. Becerra,
`No. CV 18-02458-BEN (BLMx) (S.D. Cal. Jan. 16, 2020);
`(5) Docket Report, First Franklin Financial Corp. v. Franklin First Financial, Ltd., 356
`F. Supp. 2d 1048, CV No. 04-02842-WHA (N.D. Cal. 2005);
`(6) Tweet by @LorenaSGonzalez, Twitter
`(Jan. 20, 2020, 11:55 p.m.),
`https://twitter.com/LorenaSGonzalez/status/1219528872351322114;
`(7) Tweet by @LorenaSGonzalez, Twitter
`(Jan. 20, 2020, 11:35 p.m.),
`https://twitter.com/LorenaSGonzalez/status/1219523961517527040. [Doc. # 24.]
`
`
`
` Courts “may take judicial notice of ‘matters of public record.’” Lee v. City of Los
`Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (citation omitted). Documents on file in federal or
`state courts are considered undisputed matters of public record. Harris v. County of Orange, 682
`F.3d 1126, 1132 (9th Cir. 2012). Courts take notice of the existence of such filings, not the truth
`of the facts recited therein. Lee, 250 F.3d at 689–90.
`
`
`CV-90
`
`
`CIVIL MINUTES—GENERAL
`
`Initials of Deputy Clerk KT
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 52 Filed 02/10/20 Page 6 of 24 Page ID #:1788
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 19-10956-DMG (RAOx)
`
`
`Title Lydia Olson, et al. v. State of California, et al.
`
`
`
`
`
`Date February 10, 2020
`
`Page 6 of 24
`
`
`
`The Court hereby GRANTS both requests for judicial notice regarding Assemblymember
`Gonzalez’s Tweets and the fact that the court documents were filed, but not of the facts asserted
`in the court documents. The Court also sua sponte takes notice of the Tweets and media reports
`referred to in the Complaint and the moving papers, as those documents’ existence cannot
`reasonably be disputed. Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954,
`960 (9th Cir. 2010) (“Courts may take judicial notice of publications introduced to ‘indicate what
`was in the public realm at the time, not whether the contents of those articles were in fact true.’”
`(citations omitted)). The Court also sua sponte takes notice of legislative history cited by
`Defendants at oral argument. See Assemb. Comm. Rep., AB 5, 2019–2020 Reg. Sess. (Cal. July
`10, 2019). Because the Court does not rely on the “Protect App-Based Drivers and Services
`Act” in its analysis below, the Court DENIES as moot Defendants’ request for judicial notice of
`that document.
`
`
`III.
`DISCUSSION
`
`
`A plaintiff seeking a preliminary injunction must show that (1) she is likely to succeed on

`the merits; (2) she is likely to suffer irreparable harm in the absence of preliminary relief; (3) the
`balance of equities tips in her favor; and (4) an injunction is in the public interest. Winter v. Nat.
`Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). A preliminary injunction is also appropriate
`under the Ninth Circuit’s “sliding scale” approach when a plaintiff raises “serious questions
`going to the merits” and demonstrates that “the balance of hardships tips sharply in the plaintiff’s
`favor,” in addition to showing the final two Winter factors. All. for the Wild Rockies v. Cottrell,
`632 F.3d 1127, 1134–35 (9th Cir. 2011) (quoting Lands Council v. McNair, 537 F.3d 981, 987
`(9th Cir. 2008)). The Supreme Court has cautioned that “[a]n injunction is an exercise of a
`court’s equitable authority,” which should not be invoked as a matter of course, and “a court
`should be particularly cautious when contemplating relief that implicates public interests.”
`Salazar v. Buono, 559 U.S. 700, 714 (2010).
`
`
`In the Ninth Circuit, the four “elements of the preliminary injunction test are balanced, so
`that a stronger showing of one element may offset a weaker showing of another.” Cottrell, 632
`F.3d at 1131. The Court assesses each factor seriatim.

`Likelihood of Success on the Merits
`
`A.
`
`
`Plaintiffs’ Complaint contains 10 claims against Defendants for violations of the U.S.
`Constitution’s Ninth Amendment and Equal Protection, Due Process, and Contract Clauses and
`the California Constitution’s “Baby Ninth Amendment” and Inalienable Rights, Equal
`
`CV-90
`
`
`CIVIL MINUTES—GENERAL
`
`Initials of Deputy Clerk KT
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 52 Filed 02/10/20 Page 7 of 24 Page ID #:1789
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 19-10956-DMG (RAOx)
`
`
`Title Lydia Olson, et al. v. State of California, et al.
`
`
`
`
`
`Date February 10, 2020
`
`Page 7 of 24
`
`
`
`Protection, Due Process, and Contract Clauses. [Doc. # 1.] Plaintiffs’ Motion for Preliminary
`Injunction focuses on AB 5’s alleged discrimination against Plaintiffs in violation of Equal
`Protection, deprivation of Individual Plaintiffs’ substantive due process right to pursue their
`chosen professions, and impairment of contracts between Individual and Company Plaintiffs.
`See, e.g., Mot. at 9–10 [Doc. # 14].6 The Court therefore addresses only these claims.
`
`
`Under the sliding scale approach, Plaintiffs must demonstrate at a minimum “that serious
`questions going to the merits were raised.” Cottrell, 632 F.3d at 1134–35. For the reasons stated
`below, the Court does not find likelihood of success on the merits or that sufficiently serious
`questions have been raised as to the merits of these claims.
`
`
`1.
`
`AB 5 is rationally related to a legitimate state interest and did not
`target gig economy companies in violation of Equal Protection
`
`
`
`The Fourteenth Amendment’s Equal Protection Clause “commands that no State shall
`‘deny to any person within its jurisdiction the equal protection of the laws[.]’” City of Cleburne
`v. Cleburne Living Ctr., 473 U.S. 432, 439 (1985) (quoting Plyler v. Doe, 457 U.S. 202, 216
`(1982)).
`
`
`Plaintiffs argue that AB 5 targets gig economy companies and workers and treats them
`differently from similarly situated groups. Mot. at 16–17. The parties appear to agree that AB 5
`does not warrant “some form of heightened review” because it implicates no fundamental right
`or suspect classification. Nordlinger v. Hahn, 505 U.S 1, 10 (1992); see Mot. at 16; Opp. at 14–
`15. Accordingly, the Court need only determine whether, under the Equal Protection Clause, the
`statute rationally furthers “a legitimate state interest.” Nordlinger, 505 U.S. at 10. Under the
`rational review test, a statute bears “a strong presumption of validity,” and “those attacking the
`rationality of the legislative classification have the burden ‘to negative every conceivable basis
`which might support it.’” F.C.C. v. Beach Commc’ns, 508 U.S. 307, 314–15 (1993) (quoting
`Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 364 (1973)). The Equal Protection
`inquiry does not license the Court to “‘judge the wisdom, fairness, or logic of legislative
`choices,’” and it ends if the Court finds a “‘plausible reason[] for [California’s] action.’” Fowler
`Packing Co., Inc. v. Lanier, 844 F.3d 809, 815 (9th Cir. 2016) (quoting Beach Commc’ns, 508
`U.S. at 313–14)). Plaintiffs therefore bear the heavy burden of demonstrating that AB 5
`irrationally targets gig economy companies and workers.
`
`
`
`6 All page references herein are to page numbers inserted in the header of the document by the CM/ECF
`filing system.
`
`CV-90
`
`
`CIVIL MINUTES—GENERAL
`
`Initials of Deputy Clerk KT
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 52 Filed 02/10/20 Page 8 of 24 Page ID #:1790
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`CIVIL MINUTES—GENERAL
`
`
`Case No. CV 19-10956-DMG (RAOx)
`
`
`Title Lydia Olson, et al. v. State of California, et al.
`
`
`
`
`
`Date February 10, 2020
`
`Page 8 of 24
`
`
`Id.
`
`
`
`
`Section 1 of AB 5 sets forth a statement of purpose that describes “[t]he misclassification
`of workers as independent contractors [as] a significant factor in the erosion of the middle class
`and the rise in income inequality.” A.B. 5, Ch. 296, 2019–2020 Reg. Sess. (Cal. 2019). The
`Legislature’s stated intent in enacting AB 5 is:
`
`to ensure workers who are currently exploited by being misclassified as
`independent contractors instead of recognized as employees have the basic rights
`and protections they deserve under the law, including a minimum wage, workers’
`compensation if they are injured on the job, unemployment insurance, paid sick
`leave, and paid family leave.
`
`The statement of purpose also explicitly provides that “[b]y codifying the California
`Supreme Court’s landmark, unanimous Dynamex decision, this act restores these important
`protections to potentially several million workers who have been denied these basic workplace
`rights that all employees are entitled to under the law.” Id. The State’s asserted interest in
`protecting exploited workers to address the erosion of the middle class and income inequality
`thus appears to be based on a “reasonably conceivable state of facts that could provide a rational
`basis” for any ostensible targeting of gig economy employers and workers.7 RUI One Corp. v.
`City of Berkeley, 371 F.3d 1137, 1154 (9th Cir. 2004) (quoting Beach Commc’ns, 508 U.S. at
`313); see Nordlinger, 505 U.S. at 11 (finding the state interest legitimate “so long as there is a
`plausible policy reason for the classification” and “the legislative facts on which the
`classification is apparently based rationally may have been considered to be true by the
`governmental decisionmaker”). Given this plausible reason for enacting AB 5, the Court’s
`inquiry could end here. See Fowler Packing, 844 F.3d at 815.
`
`But Plaintiffs argue that AB 5 does not rationally further that asserted governmental
`interest because its numerous exemptions “roll[] back Dynamex for the wage order claims of”
`workers who would otherwise be covered by Dynamex. Reply at 7 [Doc. # 23]. Asserting that
`many of the employers and workers in the exempted industries are “similarly situated to
`Plaintiffs,” Plaintiffs proffer the example that “an individual who chooses to earn income by
`direct selling Tupperware is exempt, and yet, if that same person earns extra income by offering
`driving services, there is no exemption.” Id. This example overlooks AB 5’s requirement that a
`direct salesperson must meet additional conditions described
`in Section 650 of
`the
`
`7 The Legislature’s choice is entitled to such deference on rational basis judicial review that it “is not
`subject to courtroom fact-finding and may be based on rational speculation unsupported by evidence or empirical
`data.” Beach Commc’ns, 508 U.S. at 315.
`
`CV-90
`
`
`CIVIL MINUTES—GENERAL
`
`Initials of Deputy Clerk KT
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 52 Filed 02/10/20 Page 9 of 24 Page ID #:1791
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`CIVIL MINUTES—GENERAL
`
`
`Date February 10, 2020
`
`Page 9 of 24
`
`Case No. CV 19-10956-DMG (RAOx)
`
`
`Title Lydia Olson, et al. v. State of California, et al.
`
`
`
`
`
`
`
`Unemployment Insurance Code, and ignores the practical differences between direct selling and
`gig economy driving. Cal. Lab. Code § 2750.3(b)(5); see Cal. Unemp. Ins. Code § 650 (defining
`direct salespersons in part as individuals who attempt to sell products in a buyer’s home and not
`in a retail or wholesale establishment). It is rational to infer that direct salespersons exert
`independence and control in choosing their sales targets and locations and how they interact with
`customers in closing their sales. Moreover, outside salespersons have been exempt from wage
`orders under California law long before AB 5. Cal. Lab. Code § 1171 (“The provisions of this
`chapter . . . shall not include any individual employed as an outside salesman[.]”); IWC Wage
`Order No. 7-2001(1)(C), codified at Cal. Code Regs. Tit. 8, § 11070(1)(C) (“The provisions of
`this order shall not apply to outside salespersons.”).
`
`In addition, referring to AB 5’s “service provider” exemption, Plaintiffs argue that “there
`is no material difference between providing local ‘moving’ of items from one’s home [to which
`AB 5 does not apply] and local delivery of items to one’s home [to which AB 5 does apply].”
`Reply at 11; see Cal. Lab. Code § 2750.3(g)(2)(C). But that exemption covers only “a business
`entity, who performs services for a client through a referral agency,” not “individual workers.”
`Cal. Lab. Code § 2750.3(g)(3). Thus, one material difference between a local moving company
`which may be exempted from AB 5 and a Postmates delivery driver who may be covered by AB
`5 is the moving company’s entity status. Plaintiffs also ignore the numerous additional criteria to
`be met by any business entity providing services, such as tutoring (if the person develops and
`teaches their own curriculum) and pet boarding (a regulated industry under the California Health
`and Safety Code section 122386), including “set[ting] its own rates for services performed,
`without deduction by the referral agency” and “deliver[ing] services to the client under service
`provider’s name, rather than under the name of the referral agency.” Id. at § 2750.3(g)(1).8
`
`These examples are thus dissimilar from the classification rejected in Merrifield v.
`Lockyer, 547 F.3d 978 (9th Cir. 2008), in which the government “undercut its own rational basis
`for the licensing scheme by excluding [plaintiff] from the exemption.” Id. at 992. In that case,
`the Ninth Circuit found no rational explanation to require certain pest controllers dealing with
`mice or pigeons to obtain a license relating to pesticide use, while similar pest controllers dealing
`with bats or squirrels were exempted from the licensing requirement, despite being more likely
`
`8 In their Complaint and Reply, Plaintiffs also argue that AB 5 is irrational because “some types of workers
`are excluded (e.g., a delivery truck driver delivering milk) while others performing substantively identical work are
`not excluded (e.g., a delivery truck driver delivering juice).” Reply at 9– 0 (quoting Compl. ¶ 24). Plaintiffs appear
`to be referring to the longstanding provision of the California Unemployment Insurance Code—also found in a
`regulation of
`the Internal Revenue Service—that “an agent-driver or commissioner-driver engaged
`in
`distributing . . . beverages (other than milk)” is considered an employee. See Cal. Unemployment Ins. Code
`§ 621(c)(1)(A); 26 CFR § 31.3121(d)-1(d)(1)(i). No milkman exemption is contained in AB 5, which modified
`Unemployment Insurance Code section 621 solely to describe the ABC test and utilize gender-neutral nouns.
`
`CV-90
`
`
`CIVIL MINUTES—GENERAL
`
`Initials of Deputy Clerk KT
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 52 Filed 02/10/20 Page 10 of 24 Page ID #:1792
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`CIVIL MINUTES—GENERAL
`
`
`Date February 10, 2020
`
`Page 10 of 24
`
`Case No. CV 19-10956-DMG (RAOx)
`
`
`Title Lydia Olson, et al. v. State of California, et al.
`
`
`
`
`
`
`
`than the former group to encounter pesticides. Id. at 988, 992. Plaintiffs have not shown that
`their work arrangements are so similar to exempted work arrangements that exempting Uber and
`Postmates from AB 5’s application would further the State’s interest in preventing
`misclassification of independent contractors. Thus, they have not borne their heavy burden of
`showing that AB 5’s exemption of other categories of industries and workers “contradicts the
`purposes of the prevailing wage law.” Allied Concrete & Supply Co. v. Baker, 904 F.3d 1053,
`1066 (9th Cir. 2018).
`
`Plaintiffs’ reliance on Fowler Packing is also unavailing. There, the Ninth Circuit held
`that the only conceivable explanation for “carve-outs” making three or four specific employers
`ineligible for a “safe harbor” affirmative defense against a piece-rate wage law was to procure
`the support of a labor union. 844 F.3d at 816 (“[W]e cannot conceive of a legitimate interest that
`would explain this decision.”); see also Allied Concrete, 904 F.3d at 1066 (describing the
`exemption in Fowler Packing as “clearly suggest[ing] improper favoritism”). It is true that
`Defendants’ Opposition does not provide specific justifications for every exemption in AB 5,
`besides the broad exemption for licensed professionals such as architects and dentists. See Opp.
`at 20. But “the burden is on plaintiffs to negate ‘every conceivable basis’ which might have
`supported the distinction between exempt and non-exempt entities.” Angelotti Chiropractic, Inc.
`v. Baker, 791 F.3d 1075, 1086 (9th Cir. 2015) (quoting Armour v. City of Indianapolis, 566 U.S.
`673, 681 (2012)).
`
`To explain the exemptions, Defendants point to the traditional distinctions between
`independent contractors and employees. AB 5 maintains exemptions of workers who were
`previously exempted under Dynamex—workers in the “administrative, executive, or professional
`category” and “outside salespersons.” 4 Cal. 5th at 925 n.8. In addition, the Assembly
`Committee on Labor & Employment noted that AB 5 needed to account for other types of typical
`independent contractors. See Assemb. Comm. Rep., AB 5, 2019 – 2020 Reg. Sess., at 8 (Cal.
`July 10, 2019). The Committee focused on “occupation-by-occupation rules” based on a
`framework consisting of: market strength (i.e., if there are finite numbers of skilled
`practitioners), rate setting, relationship between contractor and client, and “technological
`neutrality” (i.e., making no distinction between the Yellow Pages

This document is available on Docket Alarm but you must sign up to view it.


Or .

Accessing this document will incur an additional charge of $.

After purchase, you can access this document again without charge.

Accept $ Charge
throbber

Still Working On It

This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.

Give it another minute or two to complete, and then try the refresh button.

throbber

A few More Minutes ... Still Working

It can take up to 5 minutes for us to download a document if the court servers are running slowly.

Thank you for your continued patience.

This document could not be displayed.

We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.

Your account does not support viewing this document.

You need a Paid Account to view this document. Click here to change your account type.

Your account does not support viewing this document.

Set your membership status to view this document.

With a Docket Alarm membership, you'll get a whole lot more, including:

  • Up-to-date information for this case.
  • Email alerts whenever there is an update.
  • Full text search for other cases.
  • Get email alerts whenever a new case matches your search.

Become a Member

One Moment Please

The filing “” is large (MB) and is being downloaded.

Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.

Your document is on its way!

If you do not receive the document in five minutes, contact support at support@docketalarm.com.

Sealed Document

We are unable to display this document, it may be under a court ordered seal.

If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.


Access Government Site

We are redirecting you
to a mobile optimized page.





Document Unreadable or Corrupt

Refresh this Document
Go to the Docket

We are unable to display this document.

Refresh this Document
Go to the Docket