California’s strict independent contractor law known as AB 5 – which prohibits businesses from classifying a worker as an independent contractor unless they can pass all three prongs of the stringent “ABC Test” – may soon be a thing of the past.
On March 17, 2023, the Ninth Circuit Court of Appeals concluded in Olson v. State of California that Postmates and Uber could proceed with their challenge to AB 5 on the grounds that it was unconstitutional – specifically, that AB 5 violated the Equal Protection Clause of the 14th Amendment of the U.S. Constitution. In reaching its decision in the case the Court held that Postmates and Uber had presented plausible arguments that AB 5 was unconstitutional due to the many carve-outs and exceptions to the law that the legislature had created. We’ve blogged about AB 5 before, and we’ve discussed the law’s many bizarre and seemingly random carve-outs and exceptions here.
According to the Court, the “piecemeal fashion” in which these exceptions and carve outs were built into the law supported Postmates’ and Uber’s claims that the California legislature intentionally disfavored ride-hailing and gig economy companies like theirs. In addition to the suspicious carve-outs, the Court noted that the legislative record contained numerous comments by legislators about how AB 5 was targeted at ride-hailing companies specifically, supposedly as a solution to the perceived abuse of gig economy workers. These comments, combined with the many carve-outs and exceptions, suggested to the Court that AB 5 was the result of “animus rather than reason.”
As a result of the Ninth Circuit’s decision in Olson, the case goes back to the lower district court. There, the Court will perform a “rational basis” analysis of whether AB 5, in fact, violates the 14th Amendment’s Equal Protection Clause. If the Court finds that it does, the Court will then issue an injunction prohibiting the State of California from enforcing AB 5. And California business owners – and many gig economy workers – will be dancing in the streets.
You can read the Ninth Circuit’s opinion in Olson v. State of California here.