California Corner: The Employee v. Contractor Saga Continues as Uber and Postmates Face First Defeat in Attempt to Enjoin AB5

Caroline Powell Donelan and Natalie Alameddine

The hopes of California gig economy companies to retain the flexibility to classify workers as independent contractors were dashed this week when a federal district court judge refused to enjoin Assembly Bill 5 (“AB5”), which codifies the “ABC” test for most independent contractor classifications.

Governor Gavin Newsom signed AB5 into law last fall, effecting a seismic change on California’s legal landscape. Effective January 1, 2020, the law makes it nearly impossible for companies to lawfully classify most workers as independent contractors (rather than employees). The bill expands on California Supreme Court’s three-prong “ABC” test from its 2018 Dynamex decision for determining how workers can be classified, which you can read about here. With certain limited statutory exceptions, AB5 provides that, to properly classify a worker as an independent contractor in California, an employer must demonstrate that the worker: (A) is free from the company’s control and direction; (B) performs work outside of the company’s usual course of business; and (C) is customarily engaged in independent work of the same nature as the work performed. There is no balancing, as all three factors must be met. Continue reading “California Corner: The Employee v. Contractor Saga Continues as Uber and Postmates Face First Defeat in Attempt to Enjoin AB5”

Goodbye Uber Class Action, Hello Individual Arbitration

Natalie Alameddine and Caroline Powell Donelan

Last week, in a significant blow to claims that gig economy workers are entitled to pursue disputes on a class or collective basis, and possibly whether those workers will be able to establish that they are employees and not independent contractors, a three-judge panel of the Ninth Circuit Court of Appeals unanimously decertified a class of 240,000 Uber drivers. The decision in O’Conner v. Uber is a victory for the ride-share company, which will now be able to defend claims that it misclassified employees as independent contractors on an individual basis—one arbitration at a time.

For the past five years, there has been an ongoing and contentious dispute over whether Uber drivers (and similarly, Lyft and other ride-share drivers) are independent contractors or employees. If the workers are deemed to be employees, Uber could face hundreds of millions of dollars in alleged California labor code violations and business expense claims. To combat the possibility of having to litigate this issue on a class-wide basis, Uber entered into arbitration agreements with each driver, requiring that any driver’s claims be arbitrated and that each case had to be arbitrated individually (rather than as a class action). Continue reading “Goodbye Uber Class Action, Hello Individual Arbitration”