Ninth Circuit's Recalibration Of Equal Protection Favors Businesses

• Jurisdiction: United States,Federal,California
• Law Firm: Taft Stettinius & Hollister
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation
• Author: Sohan Dasgupta
• Published date: 19 April 2023

On March 17, 2023, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit decided Olson v. California.¹ Judge Johnnie B. Rawlinson, joined by Judges Danielle J. Forrest and Morrison C. England, Jr., held that because California lawmakers were overtly hostile towards certain gig economy companies and workers when they enacted various pieces of legislation burdening some but not other companies (and workers), Uber, Postmates, and related plaintiffs have plausibly pleaded an equal-protection claim under the Fourteenth Amendment to the U.S. Constitution.

The California State Legislature started down this road with A.B. 5,² which was a response to the California Supreme Court's 2018 decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles.³ That case had concerned a dispute as to whether workers were employees — in which case they might receive benefits such as "minimum wage, workers' compensation if they are injured on the job, unemployment insurance, paid sick leave, and paid family leave"⁴ — or independent contractors — less so. And it pertained to wage orders. Under Dynamex, workers presumably are employees unless the hiring entity shows:

(A) That the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
(B) That the worker performs work that is outside the usual course of the hiring entity's business; and
(C) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.⁵

A.B. 5, followed by two other California statutes, codified Dynamex and then extended it. Under these laws, the protections of California's Labor and Unemployment Insurance Codes also were to apply to the workers who counted as employees. Furthermore, California riddled its own workers-as-employees policy with exemptions galore, freeing many businesses and workers — such as lawyers; doctors; the insurance industry; architects; engineers; private investigators and accountants; freelance writers, editors, or cartoonists; manicurists, barbers or cosmetologists; real estate licensees; certain newspaper distributors; managers of recording artists; recording artists; and songwriters and lyricists — but not certain gig-economy companies (or those working there).⁶

This was no accident. As the Ninth Circuit observed, A.B. 5 "was largely driven by a perceived need to curb reported abuses in the gig economy, particularly rideshare companies and analogous platforms."⁷ A.B. 5's sponsor, Assemblywoman Lorena Gonzalez, published a Washington Post op-ed pointing out that that legislation would confer rights and benefits on gig workers that "companies such as Uber, Lyft, DoorDash, Handy and others" do not.⁸ In December 2019, the Los Angeles Times reported that Gonzalez was "open to changes in [A.B. 5] next year, including an exemption for musicians — but not for app-based ride-hailing and delivery giants."⁹

That is not all. Half a year earlier, California Assemblyman Anthony Rendon had tweeted that "[t]he gig economy is nothing new. It's a continuation of hundreds of years of corporations trying to screw over workers. With [A.B. 5], we're in a position to do something about that."¹⁰ A few months after Rendon's tweet, Assemblywoman Buffy Wicks had gone on to tweet (about A.B. 5): "I believe all workers should benefit from the hard-fought protections won by unions — just because your employer uses a smartphone app, doesn't mean they should be able to misclassify you as an independent contractor."¹¹

Uber, Postmates, and other plaintiffs who wanted the flexibility of being classified as independent contractors sued California and its Attorney General in federal court. Eventually, a procedurally complex matter made its way to the Ninth Circuit.¹² Judge Rawlinson's unanimous opinion for the Ninth Circuit panel acknowledged that economic classifications ordinarily are entitled to rational-basis review, which is a deferential form of...