A Judge Delivers Really, Really Bad News for Gig Economy Employers

On Monday, a U.S. District judge ruled that Uber, Postmates, and other companies operating in the gig economy could suffer “irreparable harm” as a result of California’s AB5 statute, which has the impact of forcing companies to reclassify independent contractors as employees.

If that sounds like a ruling in favor of gig-economy employers, think again. Judge Dolly Gee explained that the potential damage inflicted on certain companies is not as important as the public interest in setting a living wage and regulating employment. Consequently, Judge Gee denied an injunction pursued by Uber and Postmates that would halt the law.

In other words, pretty terrible news for a slew of ride-sharing apps, food-delivery services, and other businesses operating in whatever the “gig economy” now means.

In a statement, Uber said that the law is using “a biased and overtly political process that ignored the voices of the workers most affected by the law and granted preferential treatment to an arbitrary group of industries.” In other words, Uber, as do similar businesses, feel unfairly targeted.

(It’s worth pointing out that earlier, a judge exempted independent truckers from the law, while yet another judge will likely rule next month whether to temporarily keep the law from applying to freelance writers and photographers.)

Yes, Gee, agreed, the law is aimed at companies like Uber. “But such targeting,” she explained, “even if it rises to the level of animus toward gig economy companies, does not establish the Equal Protection violation.”

Additionally, it’s interesting to mention that in her ruling, Gee shot down an argument by the plaintiffs suggesting that most gig workers don’t actually value scheduling flexibility and that many workers would even be willing to give up earnings to be able to set their own schedules.

“Girl, bye!” Gee countered.

OK, she didn’t say that, but she sort of did when she pointed out that “of the 395,000 or more drivers for Uber and/or Postmates, a majority may favor — or at least be neutral to — the application of AB5 to their worker classification.”

So now what? Now the fight continues. “This is far from over,” predicts Kate Bischoff, an HR consultant and employment attorney (and also ERE.net’s new legal columnist). “The court will get to the merits of the employers’ arguments, and if Uber and Postmates still don’t like it, they’ll appeal.”

Already, numerous gig-economy organizations are banding together to organize protests and challenge AB5 with a ballot measure in November that would seek to overturn the law. Meanwhile, Bischoff adds, “Expect the California legislature to take up changes to this law, as many on both sides of the issue are unhappy with the final legislation.”

Ultimately, it may be Uber, Postmates, and fellow gig-economy companies that will be unhappy.

“It appears that the federal district court will, subject to appeal rights, ultimately determine that AB5 is constitutional,” says Elaine Turner, a partner at the law firm Hall Estill. “It will likely take several months for there to be a final judgment on the claims, which would then be followed by an appeal to the 9th Circuit, and even to the U.S. Supreme Court. Gig economy companies need to be taking steps to either make adjustments to their business models in California or choose not to do business in that state. The risks of noncompliance could be financially devastating to a company.”

What do you think? Will AB5 have an overall positive effect on workers, businesses, the economy, all of the above, none of the above? If you were leading talent acquisition at a gig economy employer in California, what would you be doing right now? Please share your thoughts below!