Claims, suits and signatures: How will gig-work law AB 5 be decided?

California's Assembly Bill 5, the landmark worker-classification law, has ignited fights on multiple fronts. It has become the subject of dueling lawsuits, wage claims by workers and a petition drive for the state ballot. And it only took effect Jan. 1.

What is clear is that the answer to a central question — whether ride-hailing drivers and other gig workers who are now independent contractors must be considered regular employees, entitled to things like a minimum wage, sick leave and health benefits — could affect the lives of hundreds of thousands of people and the prospects of companies like Uber and Lyft. What is far less clear is exactly how, and when, this question will be answered.

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To help sort it out, let's take a look at the action on AB 5 and how it could play out for gig-economy businesses and their workers.

The basics

AB 5 codified a 2018 California Supreme Court decision known as Dynamex that adopted the following "ABC" test: Workers can be considered contractors only if they control their work, if their duties are outside of what the business normally does, and if they are "customarily engaged in an independently established trade, occupation or business."

Under the law, some occupations — like doctors and real estate agents — gained exemptions. But legislators granted Uber, Lyft, DoorDash and other gig-economy companies no such carve-outs.

The stakes

Hiring employee drivers in California could cost Uber $500 million a year and Lyft $290 million, a Barclays analysis found. Uber has tweaked its app to try to comply, but as we reported, the changes may satisfy neither drivers nor the courts.

In 2018, Uber drivers' average pay, after fees and expenses, worked out to about $9 an hour, according to a study by the Economic Policy Institute, a pro-labor think tank. Uber disputed that and said the figure was about $13 an hour.

Uber, Lyft and DoorDash are among the gig economy companies investing heavily in finding a way out of complying with the bill. They have already announced that they will spend some $110 million.

What's happening in court

Already, several lawsuits related to the gig economy and AB 5 are working their way through the courts. Recent developments include:

• Uber and Postmates on Monday lost their bid for a temporary injunction against AB 5 while they try to fight the law, with U.S. District Judge Dolly Gee of the Central District of California declining to "second-guess" lawmakers and giving more weight to public interest than the plaintiffs' claims they would suffer irreparable harm. The judge added that since Uber and Postmates have said they can meet the ABC test imposed by the law — and therefore wouldn't have to reclassify drivers as employees — they can't claim they would be hurt by AB 5. Both companies are considering appeals.

• Last week, a state court denied San Diego City Attorney Mara Elliott's request for an emergency restraining order to classify Instacart workers as employees. The next motion hearing in the lawsuit — which Elliott's office filed in September based on the Dynamex decision — is scheduled for Friday. Elliot also alleges Instacart is violating California's Unfair Competition Law.

• DoorDash is facing a lawsuit from three delivery workers in states that use the ABC test — California, Illinois and Massachusetts — who allege their hourly pay for certain weeks penciled out to less than $5 an hour after expenses. That's less than the federal minimum wage of $7.25 an hour. The lawsuit, which seeks employee classification for the plaintiffs, plus class-action status, was filed Jan. 29 in U.S. District Court in San Francisco.

Drivers file wage claims

Uber and Lyft drivers filed 137 wage claims in San Francisco, Los Angeles and San Diego last week, according to labor organizers, giving city and state officials a firm nudge to enforce the law. Sam Ruiz, who showed up in San Francisco, told Protocol he's frustrated with fickle ride pricing, decreased driver bonuses and take-home pay that drops year after year.

"It's just not enough," Ruiz said. "We've got families to feed, you know?"

The wage claims will be considered by the state Labor Commissioner's Office, which could dismiss them, send them to a conference to which both parties would be invited (and could prompt a settlement), or consider them in a hearing.

If the wage claims go to a hearing, either side could appeal the decision of the hearing officer. An appeal would move the case out of the commissioner's office to local county courts. Under state limits, drivers could be entitled to up to three years of back wages.

Ken Jacobs, chair of the UC Berkeley Labor Center, predicts an onslaught of other wage claims: "Assuming there is a push toward adjudication and not settlements, this is important in pushing for rulings on the issue," Jacobs said.

Arbitration: A potential roadblock?

Uber and Lyft are likely to defend themselves by invoking arbitration agreements with drivers, according to legal experts following the AB 5 fight.

"When drivers go to the agency to file wage claims, what they're asking for is, 'Government, here's the information, you enforce the law, even if we're prohibited from filing claims because of the arbitration agreement,'" said Catherine Fisk, an employment law professor at UC Berkeley School of Law. "But AB 5 allows the government to enforce these protections."

Veena Dubal, a UC Hastings associate professor of law who has studied labor organizing among gig workers, said it may be faster and less expensive for the ride-hailing giants to settle claims. Whatever the outcome, others will be watching, including a few states considering similar legislation.

"People are watching this all over the world," Dubal said. "It's going to shape the politics of gig work all over the world. That's why Uber and Lyft really want to crush this."

Voters to decide?

Uber and Lyft, along with DoorDash, Instacart and Postmates, are pouring $110 million into a campaign to put the worker-classification question before California voters in November. They are proposing worker protections that include earnings guarantees and health care contributions but fall short of classifying drivers as employees.

The campaign to put the initiative on the November ballot, which began collecting signatures during the first week in January, is almost halfway to the necessary 623,212 signatures to qualify, a Protect App-Based Drivers & Services Act spokesperson said this week.

The campaign says it has the support of 35,000 drivers. Throughout California, about 300,000 to 400,000 ride-hailing and delivery drivers hit the streets each month, according to an analysis by the Legislative Analyst's Office.