`
`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