2020 opens with numerous legal challenges to California’s new employment laws taking effect on January 1, 2020. The new laws targeted by business groups are AB 5, which makes it more difficult for businesses to classify workers as independent contractors, and AB 51, which prohibits employers from requiring mandatory arbitration agreements with employees. If this week is any indication about how 2020 will unfold on the employment legal front, it will be an interesting year. Here are five key issues employers should understand about these legal challenges to AB 5 and AB 51:
1. Overview of AB 5 and AB 51
AB 5, which codifies the California Supreme Court’s ABC test for independent contractors as set forth in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018), was signed into law by Governor Newsom on September 18, 2019 and will become effective on January 1, 2020. The California Supreme Court ruled in Dynamex that in order for a worker to be properly classified as an independent contractor, the company must establish that the worker meets the ABC test:
- Part A: Is the worker free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact?
- Part B: Does the worker perform work that is outside the usual course of the hiring entity’s business?
- Part C: Is the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity?
AB 51, signed by the Governor in October, makes it an unlawful employment practice for an employer to require employees or applicants to “waive any right, forum, or procedure for a violation of” the California Fair Employment and Housing Act (FEHA) or the Labor Code, therefore prohibiting employers from requiring mandatory arbitration agreements from employees.
2. AB 5 challenge by Uber and Postmates
Uber and Postmates filed a lawsuit in the Central District of California challenging AB 5 as “irrational and unconstitutional.” Uber, Postmates, and two drivers, allege in the lawsuit that AB 5 violates the Equal Protection and Due Process Clauses. The lawsuit was filed on December 30, 2019.
App-based driving companies have also started the process of obtaining support for an initiative that would create an exemption for rideshare and delivery drivers from AB 5.
3. AB 5 challenge by freelance journalists
The American Society of Journalists and Authors Inc. and National Press Photographers Association have filed suit on behalf of freelance journalists challenging AB 5 arguing it violates the First Amendment. The suit alleges that because AB 5 only permits freelance journalists to write 35 articles a year for the same publication, and if they write 36 articles or more, they become an employee, it violates the journalists’ First Amendment rights. The suit also argues that AB 5 is unfair in that it grants exemptions for other professions from the law while targeting freelance journalists. The lawsuit is American Society of Journalists and Authors Inc. et al. v. Becerra.
4. AB 5 challenge by the California Trucking Association
On December 24, 2019, the California Trucking Association (CTA) filed a motion for temporary restraining order prohibiting the enforcement of AB 5 against any motor carrier operating in California. On December 31, 2019, Judge Roger T. Benitez of the U.S. Southern District Court of California granted the temporary restraining order, until the matter is heard on January 13, 2020. Judge Benitez wrote that the CTA “have shown that AB-5’s Prong B is likely preempted by the [Federal Aviation Administration Authorization Act] because AB-5 effectively mandates that motor carriers treat owner-operators as employees, rather than as the independent contractors that they are. In other words, because contrary to Prong B, drivers perform work within “the usual course of the [motor carrier] hiring entity’s business,” drivers will never be considered independent contractors under California law.”
5. AB 51 challenged in court by U.S. Chamber of Commerce
As previously written about here, on December 30, 2019, District Judge Kimberly J. Mueller of the Eastern District of California issued a temporary restraining order barring enforcement of AB 51. The hearing for the preliminary injunction motion is set for January 10, 2020.
Happy New Year!