Uber and Postmates sued California in federal court on Monday, alleging that legislation set to take effect in the US state ostensibly meant to improve worker conditions unfairly targeted them and should be considered unconstitutional.
Assembly Bill 5 is set to come into force on January 1 and could prove a risk for ride-hailing groups and on-demand couriers. The law threatens to change the employment status of on-demand workers from independent contractors to employees, which advocates say would bring added benefits but critics say would kill the very flexibility these workers crave.
The lawsuit, filed in the US District Court for the Central District of California, in Los Angeles, alleges the legislation infringes on the constitutional right of workers to “pursue their chosen occupations as their own bosses, not to be forced into a rigid employee-employer relationship”.
The companies also said that AB5 drew “irrational distinctions” between industries and thus violated equal protection.
“The drafters exempted dozens of other professions that have similar degrees of worker independence, based only on the industry they operate in,” the companies said. “For example, direct salespersons, manicurists and hair stylists are exempted — but not rideshare or delivery providers. This distinction is irrational.”
Assemblywomen Lorena Gonzalez, a co-author of AB5, tweeted just before the lawsuit was filed that she expected lots of “false accusations by gig companies”.
She later posted in response to the “irrational distinctions” claim, explaining how on-demand workers lacked the power to set their own rates and were restricted in exercising their own judgments.
The stakes are high for the tech companies, whose fast growth has been bankrolled by venture capital but whose business models already struggle to turn a profit. If Uber and Postmates were to treat all workers who rely on their apps as employees, it would likely increase their expenditures and disrupt their business model in California — and potentially serve as a model for other states and countries.
When the law was signed by California governor Gavin Newsom in September it was hailed by a variety of labour groups such as Gig Workers Rising. The share prices of Uber and Lyft fell, while politicians predicted ramifications across the country.
In Monday’s lawsuit, Uber and Postmates were joined by two named gig economy plaintiffs who wrote blog posts describing how the jobs fit their lifestyle and how AB5 would threaten rather than improve their situation.
Lydia Olsen, a driver for Uber, called AB5 misguided and unjust. She added: “Being a rideshare driver is not perfect, and there are many areas where the relationship between the drivers and companies could be improved. However, forcing us into a legal framework that we never signed up for and did not want is not the way to solve this.”
Miguel Perez, who does courier work for Postmates, wrote that the law would eliminate the freedom he enjoys from working when he wants. “The constitution does not allow lawmakers to trample on the rights of so many California workers and businesses,” he said.
The lawsuit, directed against the state of California and attorney-general Xavier Becerra, is part of a wider effort among gig economy companies to reframe the debate by garnering public support for their position.
Earlier this year Uber, Lyft and Doordash pledged to spend $90m on a ballot initiative in November 2020 that would seek to exempt the companies from reclassification and lay out alternatives. The groups said they were working to expand worker benefits and protections “while still balancing worker flexibility in the 21st century”.