In an important ruling for California’s gig-based economy, on March 17, 2023 the Ninth Circuit Court of Appeals affirmed in part and reversed in part the district court orders dismissing Lydia Olson, Miguel Perez, Postmates Inc., and Uber Technologies Inc.’s (“Plaintiffs”) Second Amended Complaint and denying Plaintiffs’ motion for a preliminary injunction, and remanded, in an action seeking to enjoin the State of California and the California Attorney General from enforcing California Assembly Bill 5 (“AB 5”). The enactment of AB 5 was largely driven by a perceived need to curb reported abuses in the gig economy, particularly rideshare companies and analogous platforms. AB 5 codified the “ABC test” adopted by the Supreme Court of California but incorporated numerous exemptions into its provisions. Within a year of its enactment, AB 5 was amended by California Assembly Bills 170 and 2257 and both bills exempted additional workers but excluded app-based drivers. Plaintiffs filed this action to enjoin the State of California and the Attorney General from enforcing AB 5 and claimed that the legislation violated the Equal Protection Clauses, the Due Process Clauses, the Contract Clauses and the Bill of Attainder Clauses of the United States and California Constitutions. 

The Ninth Circuit panel found that the district court erred by dismissing Plaintiffs’ equal protection claim, citing that Plaintiff allegations were plausible due to AB 5 being enacted out of disfavor for Uber, Postmates, and other similar gig-based models. However, the panel further held that the district court correctly dismissed Plaintiffs’ due process claims because Plaintiffs failed to plausibly allege that AB 5, completely prohibits them from exercising their “right to engage in a calling.” The panel held that AB 5, did not violate the Contract Clause because it neither interfered with Plaintiffs’ reasonable expectations nor prevented them from safeguarding or reinstating their rights. Plaintiffs’ Bill of Attainder claims likewise failed because Plaintiffs did not plausibly allege that AB 5 inflicted punishment on them. The panel did however remand the district court to reconsider Plaintiffs’ motion for a preliminary injunction, considering the new allegations contained in the Second Amended Complaint. 

Given the Ninth Circuit panel’s decision to remand the district court to reconsider Plaintiff’s motion for a preliminary injunction, we will keep you informed as this matter progresses. For any questions, please contact Ann Grottveit at agrottveit@kscsacramento.com.