The dispute dates back to 2019, when the state legislature enacted AB 5 and adopted the "
Pursuant to AB 5, all workers are assumed to be employees - not independent contractors - unless the employer can affirmatively satisfy the
The new law faced immediate challenges, ranging from a First Amendment action to a lawsuit filed by freelance writers and photographers.
In addition,
They argued that the law, as it was enacted and then later amended by Assembly Bills 170 and 2257, both of which added more exemptions for specific categories of workers, violated the Equal Protection Clause for those engaged in app-based ride-hailing and delivery services. There are currently over 100 different industry and job-specific exemptions to the initially "simple"
The district court sided with the state and dismissed the case, but a three-judge panel of the Ninth Circuit reversed, ruling that the statute couldn't survive rational basis constitutional review, given the lack of apparent rhyme or reason to the various exemptions.
In a unanimous decision, the en banc Ninth Circuit reached a different conclusion, holding that it was rational for the
"There are plausible reasons for treating transportation and delivery referral companies differently from other types of referral companies, particularly where the legislature perceived transportation and delivery companies as the most significant perpetrators of the problem it sought to address - worker misclassification," the court wrote.
By codifying and expanding the reach of the
While the plaintiffs alleged that the app-based work arrangements in the transportation and delivery service industry have functionally identical business models, "that similarity alone does not compel us to conclude that there is no rational reason to treat those apps differently," the court said. "One explanation for such a distinction is that the legislature perceived
The exemptions carved out by the legislature plausibly reflect its determination that workers in certain occupations and industries bear closer resemblance to traditionally lawful independent contractors, the court added, and that AB 5 might be underinclusive because it does not extend the
"
As the Ninth Circuit found "plausible reasons" to exist for the law, the district court's dismissal of the plaintiff's claims was affirmed.
To read the opinion in Olson v. California, click here. For recent media comments from Manatt attorney
Why it Matters
The federal appellate panel's decision leaves the state with a hodgepodge law that will likely continue to be challenged. In the meantime, companies should ensure that their workers are properly classified, understanding that the default presumption is that a worker is an employee unless the
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