throbber
Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 1 of 31 Page ID
` #:1813
`
`XAVIER BECERRA
`Attorney General of California
`TAMAR PACHTER
`Supervising Deputy Attorney General
`JOSE A. ZELIDON-ZEPEDA
`Deputy Attorney General
`State Bar No. 227108
`455 Golden Gate Avenue, Suite 11000
`San Francisco, CA 94102-7004
`Telephone: (415) 510-3879
`Fax: (415) 703-1234
`E-mail: Jose.ZelidonZepeda@doj.ca.gov
`Attorneys for the State of California and Attorney
`General Xavier Becerra, in his official capacity
`
`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE CENTRAL DISTRICT OF CALIFORNIA
`
`WESTERN DIVISION
`
`LYDIA OLSON; et al.,
`
`2:19-CV-10956-DMG-RAO
`
`Plaintiffs,
`
`v.
`
`STATE OF CALIFORNIA; et al.,
`
`Defendants.
`
`MEMORANDUM OF POINTS
`AND AUTHORITIES
`SUPPORTING DEFENDANTS’
`MOTION TO DISMISS
`
`April 24, 2020
`Date:
`9:30 a.m.
`Time:
`Courtroom: 8C, 8th Floor
`Judge:
`Hon. Dolly M. Gee
`Trial Date: Not set
`Action Filed: December 30, 2019
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 2 of 31 Page ID
` #:1814
`
`TABLE OF CONTENTS
`
`
`Page
`
`
`
`B.
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`Introduction ................................................................................................................ 1
`Background ................................................................................................................ 2
`A.
`In Dynamex, the California Supreme Court Adopted the
`ABC Test. ................................................................................... 2
`Assembly Bill 5 Codified the ABC Test to Remedy
`Widespread Misclassification of Employees as
`Independent Contractors. ............................................................ 3
`The Statutory Exemptions. ......................................................... 4
`C.
`Allegations of the Complaint......................................................6
`D.
`Legal Standard ........................................................................................................... 7
`Argument ................................................................................................................... 8
`I.
`Plaintiffs’ Equal Protection Claims (Claims I and II) Fail
`Because AB 5 is rationally related to a legitimate government
`interest. .................................................................................................. 8
`A.
`The Legislature’s Interest in Protecting Exploited
`Workers to Address the Erosion of the Middle Class and
`Income Inequality Is a Rational Basis for Any Ostensible
`Targeting of Gig Economy Employers and Workers. ................ 9
`The Complaint’s Allegations of “Animus” Do Not Suffice
`to Allege Actionable Claims. .................................................... 10
`Plaintiffs’ Due Process Claims (Claims IV, V, and VIII) Fail
`because AB 5 Determines Legal Classification, Not Occupation ...... 14
`Plaintiffs’ Contract Clause Claims (Claims IX and X) Fail to
`Allege any Unconstitutional Impairment. ........................................... 16
`Plaintiffs’ Claims for Violation of The Ninth Amendment,
`“Baby Ninth,” and Inalienable Rights Provision of the California
`Constitution (Claims VI, III, and VII) Fail For Lack of
`Enforceable Rights. ............................................................................. 20
`The State of California Is Immune From Suit in Federal Court. ........ 23
`V.
`Conclusion ............................................................................................................... 23
`
`B.
`
`II.
`
`III.
`
`IV.
`
`i
`
`
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 3 of 31 Page ID
` #:1815
`
`TABLE OF AUTHORITIES
`
`
`Page
`
`
`
`CASES
`
`Alexander v. FedEx Ground Package Sys., Inc.
`765 F.3d 981 (9th Cir. 2014) ............................................................................... 16
`
`Allen v. Bd. of Administration
`34 Cal. 3d 114 (Cal. 1983) .................................................................................. 18
`
`Amer. Law Foundation v. Meyer
`120 F.3d 1092 (10th Cir. 1997) ........................................................................... 22
`
`Anchorage v. Integrated Concepts & Research Corp.
`1 F. Supp. 3d 1001 (D. Alaska 2014) .................................................................... 8
`
`Angelotti Chiropractic v. Baker
`791 F.3d 1075 (9th Cir. 2015) ............................................................................. 14
`
`Arizona Hospital & Healthcare Ass’n v. Betlach
`862 F. Supp. 2d 978 (D. Ariz. 2012) ..................................................................... 7
`
`Ashcroft v. Iqbal
`556 U.S. 662 (2009) .......................................................................................... 7, 8
`
`Bell Atlantic Corp. v. Twombly
`550 U.S. 544 (2007) .............................................................................................. 7
`
`Berwick v. Uber Technologies, Inc.
`Case No. 11-46739 EK, 2015 WL 4153765 (Cal. Lab. Comm’r
`June 3, 2015) .......................................................................................................... 6
`
`Chorn v. Workers’ Comp. Appeals Bd.
`245 Cal. App. 4th 1370 (Cal. Ct. App. 2016) ..................................................... 19
`
`City of Carmel-by-the-Sea v. Young
`2 Cal. 3d 259 (Cal. 1970) .................................................................................... 23
`
`City of Cleburne v. Cleburne Living Ctr.
`473 U.S. 432 (1985) .............................................................................................. 9
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`ii
`
`
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 4 of 31 Page ID
` #:1816
`
`TABLE OF AUTHORITIES
`(continued)
`
`
`Clausing v. San Francisco Unified School Dist.
`221 Cal. App. 3d 1224 (Cal. Ct. App. 1990) ....................................................... 23
`
`Page
`
`Clements v. Fashing
`457 U.S. 957 (1982) ............................................................................................ 13
`
`Coakley v. Murphy
`884 F.2d 1218 (9th Cir. 1989) ............................................................................... 8
`
`Conn v. Gabbert
`526 U.S. 286 (1999) ...................................................................................... 15, 16
`
`Cornwell v. Hamilton
`80 F. Supp. 2d 1101 (S.D. Cal. 1999) ................................................................. 16
`
`Cotter v. Lyft, Inc.
`60 F. Supp. 3d 1067 (N.D. Cal. 2015)................................................................... 6
`
`Deanco Healthcare, LLC v. Becerra
`365 F. Supp. 3d 1029 (C.D. Cal. 2019) ............................................................... 24
`
`Dittman v. California
`191 F.3d 1020 (9th Cir. 1999) ............................................................................. 16
`
`Doe v. Uber Technologies, Inc.
`184 F. Supp. 3d 774 (N.D. Cal. 2016)................................................................... 6
`
`Dynamex Operations W. v. Superior Court
`4 Cal. 5th 903 (Cal. 2018) ..................................................................... 2, 3, 10, 17
`
`Energy Reserves Group, Inc. v. Kansas Power & Light Co.
`459 U.S. 400 (1983) ................................................................................ 18, 19, 20
`
`Engquist v. Or. Dep’t of Agric.
`478 F.3d 985 (9th Cir. 2007) ............................................................................... 17
`
`Erotic Serv. Provider Legal Educ. and Research Project v. Gascon
`880 F.3d 450 (9th Cir. 2018) ............................................................................... 17
`
`FCC v. Beach Communications, Inc.
`508 U.S. 307 (1993) ........................................................................................ 9, 10
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`iii
`
`
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 5 of 31 Page ID
` #:1817
`
`TABLE OF AUTHORITIES
`(continued)
`
`
`Franceschi v. Yee
`887 F.3d 927 (9th Cir. 2018) ......................................................................... 15, 17
`
`Page
`
`Gallinger v. Becerra
`898 F.3d 1012 (9th Cir. 2018) ............................................................................. 14
`
`Gibson v. Matthews
`926 F.2d 532 (7th Cir. 1991) ............................................................................... 22
`
`Greene v. Dayton
`806 F.3d 1146 (8th Cir. 2015) ............................................................................. 20
`
`Halverson v. Skagit Cty.
`42 F.3d 1257 (9th Cir. 1994) ............................................................................... 15
`
`Hardesty v. Sacramento Metro. Air Quality Mgmt. Dist.
`307 F. Supp. 3d 1010 (E.D. Cal. 2018) ............................................................... 16
`
`Hertzberg v. Dignity Partners, Inc.
`191 F.3d 1076 (9th Cir. 1999) ............................................................................. 14
`
`Hoohuli v. Ariyoshi
`631 F. Supp. 1153 (D. Hawaii 1986) .................................................................. 12
`
`Hudson Water Co. v. McCarter
`209 U.S. 349 (1908) ............................................................................................ 19
`
`In re Cutera Securities Litig.
`610 F.3d 1103 (9th Cir. 2010) ............................................................................... 7
`
`In re Kelly
`841 F.2d 908 (9th Cir. 1988) ............................................................................... 14
`
`In re Monrovia Evening Post
`199 Cal. 263 (Cal. 1926) ..................................................................................... 21
`
`Leger v. Stockton Unif. Sch. Dist.
`202 Cal. App. 3d 1448 (Cal. Ct. App. 1988) ....................................................... 23
`
`Lindsley v. Natural Carbonic Gas Co.
`220 U.S. 61 (1911) .............................................................................................. 13
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`iv
`
`
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 6 of 31 Page ID
` #:1818
`
`TABLE OF AUTHORITIES
`(continued)
`
`
`Linton v. Desoto Cab Co., Inc.
`15 Cal. App. 5th 1208 (2017) ................................................................................ 1
`
`Page
`
`Manduley v. Super. Ct.
`27 Cal. 4th 537 (Cal. 2002) ................................................................................... 9
`
`McCarthy v. United States
`850 F.2d 558 (9th Cir. 1988) ................................................................................. 8
`
`Nordlinger v. Hahn
`505 U.S 1 (1992) ............................................................................................. 9, 10
`
`O’Connor v. Uber Technologies, Inc.
`82 F. Supp. 3d 1133 (N.D. Cal. 2015)................................................................... 6
`
`Owens v. City of Signal Hill
`154 Cal. App. 3d 123 (Cal. Ct. App. 1984) ......................................................... 16
`
`Pennhurst State Sch. & Hosp. v. Halderman
`465 U.S. 89 (1984) .............................................................................................. 24
`
`People v. Cruz
`207 Cal. App. 4th 664 (Cal. Ct. App. 2012) ......................................................... 9
`
`People v. De La Torre
`257 Cal. App. 2d 162 (Cal. Ct. App. 1967) ......................................................... 21
`
`Real v. Driscoll Strawberry Associates, Inc.
`603 F.2d 748 (9th Cir. 1979) ............................................................................... 21
`
`RUI One Corp. v. City of Berkeley
`371 F.3d 1137 (9th Cir. 2004) ......................................................................... 9, 20
`
`S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations
`48 Cal. 3d 341 (Cal. 1988) ...................................................................... 1, 2, 6, 21
`
`San Diego Cty. Gun Rights Comm. v. Reno
`98 F.3d 1121 (9th Cir. 1996) ............................................................................... 22
`
`Sanchez v. City of Reno
`914 F. Supp. 2d 1079 (E.D. Cal. 2012) ............................................................... 16
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`v
`
`
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 7 of 31 Page ID
` #:1819
`
`TABLE OF AUTHORITIES
`(continued)
`
`
`Schowengerdt v. U.S.
`944 F.2d 483 (9th Cir. 1991) ............................................................................... 22
`
`Page
`
`Severns v. Union Pacific Railroad Co.
`101 Cal. App. 4th 1209 (Cal. Ct. App. 2002) ..................................................... 18
`
`Smith v. Reyes
`904 F. Supp. 2d 1070 (S.D. Cal. 2012) ................................................................. 8
`
`Strandberg v. City of Helena
`791 F.2d 744 (9th Cir. 1986) ............................................................................... 22
`
`Tieberg v. Unemployment Ins. App. Bd.
`2 Cal 3d 943 (Cal. 1970) ..................................................................................... 21
`
`Truax v. Raich
`239 U.S. 33 (1915) .............................................................................................. 16
`
`U.S. v. Ninety Three Firearms
`330 F.3d 414 (6th Cir. 2003) ............................................................................... 14
`
`U.S. v. Ritchie
`342 F.3d 903 (9th Cir. 2003) ................................................................................. 8
`
`Washington Health Care Ass’n v. Arnold-Williams
`601 F. Supp. 2d 1224 (W.D. Wash. 2009) .......................................................... 18
`
`Western States Trucking Ass’n v. Schoorl
`377 F. Supp. 3d 1056 (E.D. Cal. 2019) ............................................................... 17
`
`STATUTES
`
`California Labor Code
`§ 2750.3(a)(1) .................................................................................................. 4, 10
`§ 2750.3(c) ........................................................................................................... 13
`§ 2750.3(e) ........................................................................................................... 13
`§ 3351(i) .......................................................................................................... 4, 10
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`vi
`
`
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 8 of 31 Page ID
` #:1820
`
`TABLE OF AUTHORITIES
`(continued)
`
`
`CONSTITUTIONAL PROVISIONS
`
`Page
`
`California Constitution
`Article I, § 9 ......................................................................................................... 18
`Article I, § 24 ....................................................................................................... 22
`Article 14, § 1 ...................................................................................................... 21
`
`United States Constitution
`Ninth Amendment ................................................................................. 2, 7, 21, 22
`Eleventh Amendment .......................................................................................... 24
`Fourteenth Amendment ................................................................................ passim
`Article I, § 10, cl. 1 ....................................................................................... passim
`
`COURT RULES
`
`Federal Rule of Civil Procedure
`Rule 12(b)(1) ......................................................................................................... 8
`Rule 12(b)(6) ..................................................................................................... 7, 8
`
`OTHER AUTHORITIES
`
`California Assembly Bill
`5 ............................................................................................................................. 3
`5, § 1(c) ............................................................................................................ 3, 10
`5, § 1(e) ............................................................................................................ 4, 10
`5, § 1(g) ................................................................................................................ 17
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`vii
`
`
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 9 of 31 Page ID
` #:1821
`
`INTRODUCTION
`In denying Plaintiffs’ request for a preliminary injunction, the Court correctly
`
`held that Plaintiffs’ attacks on AB 5 fail to raise any serious questions as to the
`
`constitutionality of the law. For many of the same reasons contained in that
`
`decision, the Court should now dismiss Plaintiffs’ challenge in its entirety.
`
`To combat the ills of worker misclassification, California enacted Assembly
`
`Bill (AB) 5, which defines how employment status is determined for purposes of
`
`certain state laws. AB 5 did not create the employee/independent contractor
`
`distinction, which is both longstanding and of significance. Under California’s
`
`protective labor laws, workers have long been presumed to be employees with a
`variety of rights,1 including the minimum wage, safe working conditions, sick
`
`leave, worker’s compensation benefits if they are injured on the job, unemployment
`
`benefits if they lose their job, and disability benefits if they are disabled and cannot
`
`work. Bona fide independent contractors do not enjoy such protections.
`
`Given the difference in protections employees enjoy under the law, in
`
`enacting AB 5, the Legislature recognized that worker misclassification exploits
`
`workers, harms their families, and puts competitors who properly classify workers
`
`at a competitive disadvantage. The public good also suffers. Misclassification
`
`shifts costs from employers to taxpayers, robs the state of taxes it uses to fund the
`
`social safety net, and degrades the quality of jobs, causing more workers (and their
`
`families) to require the social safety net and contributing to income inequality.
`
`Thus, to mitigate these harms, AB 5 codified and expanded application of the
`
`simplified “ABC” test, which the California Supreme Court previously adopted in
`
`2018 after recognizing the “significant disadvantages” the then-existing generally
`
`1 See, e.g., S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations, 48 Cal. 3d
`341, 349 (Cal. 1988) (“One seeking to avoid liability has the burden of proving that
`persons whose services he has retained are independent contractors rather than
`employees.”); Linton v. Desoto Cab Co., Inc., 15 Cal. App. 5th 1208, 1220-21
`(2017) (noting that Borello rebuttable presumption of employment applies to Labor
`Code “provisions falling outside workers’ compensation”).
`
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`1
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 10 of 31 Page ID
` #:1822
`
`applicable multi-factor test had. See Dynamex Operations W. v. Superior Court, 4
`
`Cal. 5th 903, 954-55 (Cal. 2018).
`
`In this case, two corporate and two individual Plaintiffs seek to invalidate
`
`and enjoin enforcement of AB 5, alleging a lengthy list of federal and state
`
`constitutional violations. Plaintiffs claim that the law unfairly “targets” online
`
`companies, discriminates on the basis of occupation, and prevents the pursuit of a
`
`chosen occupation. None of these claims has merit. Plaintiffs’ Equal Protection,
`
`Due Process, and Contract Clause claims under the U.S. and California
`
`Constitutions fail as a matter of law for the same reasons the Court cataloged in its
`
`order denying preliminary injunctive relief. For similar reasons, Plaintiffs’ related
`
`claims under the Ninth Amendment, and the “Baby Ninth” and Inalienable Rights
`
`provision of the California Constitution also fail as a matter of law. Accordingly,
`
`the Court should dismiss the Complaint without leave to amend.
`
`BACKGROUND2
`
`A.
`
`In Dynamex, the California Supreme Court Adopted the ABC
`Test.
`
`The distinction between workers classified as employees and those classified
`
`as independent contractors is significant because California law affords employees
`
`rights that independent contractors do not enjoy. See Dynamex, 4 Cal. 5th at 912.
`
`Prior to 2018, regulatory agencies and courts used a multi-factor test enunciated in
`
`S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341
`
`(Cal. 1989) (Borello). In April 2018, the California Supreme Court held that courts
`
`must apply the ABC test, rather than Borello, to determine whether a worker is
`
`classified as an employee for certain purposes under California’s labor laws. Id. at
`
`916. Dynamex noted that the “critically important objectives” of wage and hour
`
`laws, including ensuring low income workers’ wages and conditions despite their
`
`
`2 This section is substantially drawn from Defendants’ opposition to
`Plaintiffs’ motion for a preliminary injunction, except section C.
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`2
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 11 of 31 Page ID
` #:1823
`
`weak bargaining power, “support a very broad definition of the workers” who fall
`
`within the employee classification. Dynamex, 4 Cal. 5th at 952. Similarly, a broad
`
`definition benefits “those law-abiding businesses that comply with the obligations
`
`imposed” by state labor laws, “ensuring that such responsible companies are not
`
`hurt by unfair competition from competitor businesses that utilize substandard
`
`employment practices.” Id. Lastly, the ABC test also benefits “the public at large,
`
`because if the wage orders’ obligations are not fulfilled, the public often will be left
`
`to assume the responsibility of the ill effects to workers and their families resulting
`
`from substandard wages or unhealthy and unsafe working conditions.” Id. at 953.
`
`Under the ABC test, a worker is classified as an employee, rather than an
`
`independent contractor, unless the hiring entity establishes: (a) that the worker 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) that the worker “performs work that is outside the usual course of the hiring
`
`entity’s business;” and (c) that the worker 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.
`
`B. Assembly Bill 5 Codified the ABC Test to Remedy Widespread
`Misclassification of Employees as Independent Contractors.
`
`On September 18, 2019, California enacted AB 5, which became effective
`
`January 1, 2020. AB 5 codified and expanded the scope of the ABC test adopted in
`
`Dynamex. The Legislature found that “[t]he misclassification of workers as
`
`independent contractors has been a significant factor in the erosion of the middle
`
`class and the rise in income inequality.” (AB 5 § 1(c).) In enacting AB 5, the
`
`Legislature intended “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 minimum
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`3
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 12 of 31 Page ID
` #:1824
`
`wage, workers’ compensation, unemployment insurance, paid sick leave, and paid
`
`family leave. (Id. § 1(e).)
`
`The Legislature noted that “a 2000 study commissioned by the U.S.
`
`Department of Labor found that nationally between 10% and 30% of audited
`
`employers misclassified workers,” and that a 2017 audit program by the California
`
`Employment Development Department that conducted 7,937 audits and
`
`investigations “identified nearly half a million unreported employees.” (Bill
`
`Analysis, Assembly Committee on Labor and Employment 7/5/19 at p. 2, available
`
`at
`
`https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201920200
`
`AB5 [last visited Feb. 12, 2020] (emphasis in original).) Misclassification, the
`
`Legislature further noted, is particularly prevalent in certain growing industries.
`
`“Recent research also supports the prevalence of misclassification and finds some
`
`of the highest misclassification rates in the economy’s growth industries, including
`
`home care, janitorial, trucking, construction, hospitality, security, and the app-based
`
`‘on demand’ sector.” (Id.)
`
`By adopting the ABC test, AB 5 “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.” (AB 5 § 1(e).) AB 5
`
`extends the ABC test to include (among other things) workers’ compensation,
`
`unemployment insurance, and disability insurance. Cal. Lab. Code, § 2750.3(a)(1);
`
`id. § 3351(i).
`
`C. The Statutory Exemptions.
`AB 5 also created limited statutory exemptions to the ABC test for certain
`
`occupations and industries, where the Legislature felt the ABC test was not a good
`
`fit. The Legislature considered various factors in deciding on these exemptions,
`
`including whether the individuals hold professional licenses (for example,
`
`insurance brokers, physicians and surgeons, and securities dealers). (Bill Analysis,
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`4
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 13 of 31 Page ID
` #:1825
`
`Senate Committee on Labor Employment and Retirement 7/8/19 at pp. 2-3,
`
`https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201920200
`
`AB5 [last visited Feb. 12, 2020].) Other factors considered included whether the
`
`worker is truly free from direction or control of the hiring entity (for example,
`
`workers providing hairstyling and barbering services who have their own set of
`
`clients and set their own rates). (Id.) Still others were considered for an exemption
`
`if they perform “professional services,” as a sole proprietor or other business entity
`
`and meet specific indicia of status as independent businesses. (Id.) In its effort to
`
`identify the hallmarks of true independent contractors for purpose of exemptions
`
`from the ABC test, the Legislature also considered the bargaining power of workers
`
`in particular occupations and industries, the ability of the worker in particular
`
`occupations and industries to set their own rate of pay, and the nature of the
`
`relationship between the contractor and the client. (Id. at 8-10.)
`
`The legislative history also specifically addressed concerns about AB 5’s
`
`impact on “digital applications,” and the “gig economy,” noting that while there
`
`had been significant media attention on the issue, the bill in fact made no
`
`distinction between app-based companies and traditional businesses. (Bill
`
`Analysis, Senate Committee on Labor Employment and Retirement 7/8/19 at p. 10,
`
`https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201920200
`
`AB5 [last visited Feb. 12, 2020].) In discussing the exemptions, the legislature
`
`noted that the means by which a customer obtains the worker’s services are
`
`irrelevant to the worker’s status as an employee or independent contractor. (Id.)
`
`“[I]f a client secures the services of a contractor through an intermediary, it is
`
`unclear how the People of California are well served if a law makes a distinction
`
`between the intermediary being contacted through the Yellow Pages or the
`
`internet.” (Id.) Ultimately, “[t]he core question is if the intermediary is, to use the
`
`legal world as a model, deriving disproportionate benefits from the relationship.”
`
`(Id.) “A company that utilizes the independent contractor model to undercut the
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`5
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 14 of 31 Page ID
` #:1826
`
`employer-based model to cut costs and achieve profitability or scale is a company
`
`that misclassifies its workers.” (Id.)
`
`D. Allegations of the Complaint.
`Plaintiffs Uber and Postmates (the Company Plaintiffs) operate application-
`
`based platforms to deliver transportation services to individual consumers. (ECF
`
`No. 1 at ¶¶ 32-33.) Plaintiffs Olson and Perez are individuals who use app-based
`
`platforms of Uber and Postmates “to get leads” for passenger and delivery requests.
`
`(Id. at 13 ¶¶ 30-31.) Plaintiffs challenge AB 5 as “vague” and “incoherent,” and
`
`contend that it does not further the Legislature’s goals. (Id. at 8 ¶ 19.) They argue
`
`that AB 5 requires the Company Plaintiffs to fundamentally restructure their
`
`business model, thus imposing economic, administrative and other costs. (Id. at 8-9
`
`¶ 20.)
`
`The complaint notes that AB 5 has numerous exemptions, and alleges that
`
`“[t]he legislature added these carve-outs to AB 5 solely for interest groups and
`
`labor.” (ECF No. 1 at 18 ¶ 54.) “The statutory exemptions carve out most types of
`
`workers traditionally considered to be independent contractors, with a glaring and
`
`intentional exception: app-based independent services providers.” (Id. ¶ 56.)3
`
`Plaintiffs cite alleged inconsistencies or purported irrationality in AB 5’s
`
`exemptions, and complain that the law “does not identify any data, studies, reports,
`
`or other justification or explanation for its exemptions.” (Id. at 21 ¶¶ 59-60.)
`
`3 The complaint alleges no facts supporting the conclusion that these workers
`were “traditionally considered to be independent contractors” other than a citation
`to one court decision. (Id. ¶ 55.) Indeed, the California Labor Commissioner has
`already determined that, under Borello, one of Plaintiff Uber’s drivers was
`misclassified as an independent contractor. See Berwick v. Uber Technologies,
`Inc., Case No. 11-46739 EK, 2015 WL 4153765 (Cal. Lab. Comm’r June 3, 2015).
`Moreover, multiple court decisions have rejected attempts by app-based employers
`to dismiss claims that their drivers are employees, concluding that there are
`disputed issues of fact. O’Connor v. Uber Technologies, Inc., 82 F. Supp. 3d 1133,
`1138 (N.D. Cal. 2015); see also Doe v. Uber Technologies, Inc., 184 F. Supp. 3d
`774, 783 (N.D. Cal. 2016) (in action by customers alleging sexual assault by Uber
`drivers, holding at motion to dismiss stage that plaintiffs “alleged sufficient facts
`that employment relationship may plausibly exist”); Cotter v. Lyft, Inc., 60 F. Supp.
`3d 1067 (N.D. Cal. 2015) (holding that genuine issue of material fact whether
`carrier improperly classified drivers as independent contractors).
`
`1 2
`
`
`
`3
`
`4
`
`5
`
`6
`
`7
`
`8
`
`9
`
`10
`
`11
`
`12
`
`13
`
`14
`
`15
`
`16
`
`17
`
`18
`
`19
`
`20
`
`21
`
`22
`
`23
`
`24
`
`25
`
`26
`
`27
`
`28
`
`6
`
`

`

`Case 2:19-cv-10956-DMG-RAO Document 55-1 Filed 02/13/20 Page 15 of 31 Page ID
` #:1827
`
`Plaintiffs also conclude, without alleging any facts, that “many of the exemptions
`
`[were included] as political favors or to politically favored groups without any valid
`
`legislative purpose or rational basis.” (Id. ¶ 61.)
`
`Plaintiffs allege that AB 5 violates a litany of state and federal constitutional
`
`provisions (ECF No. 1 at 35-37). “Plaintiffs’ Complaint contains 10 claims against
`
`Defendants for violation

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