Federal Judge Refuses To Grant Injunction Against California’s Gig Economy Law, But Acknowledges ‘Likelihood of Irreparable Harm’
A federal judge this week declined to grant Uber and Postmates an injunction against Assembly Bill 5 (A.B. 5), the gig-economy law in California that is forcing many companies to reclassify their contractors as employees.
Judge Dolly M. Gee of the U.S. District Court for the Central District of California wrote that “the balance of equities and the public interest” favor enforcing the law, although she conceded that the two companies will likely experience some “irreparable harm” as a result.
Many gig-economy companies and independent contractors are suffering across the state of California in the wake of A.B. 5 taking effect on January 1.
Filed in response to the ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, A.B. 5 imposes a much broader standard in determining if workers are contractors or employees. To pass the “ABC test,” a contractor must A) control his or her own workload, B) perform tasks that are not crucial to the company’s main scope of operations, and C) be “customarily engaged” in the work.
The legislation sent a slew of industries into disarray at the start of the year. Employees in California are entitled to benefits not offered to contractors, such as a minimum wage, health insurance, paid time off, and reimbursement for expenses. Experts estimate that ridesharing companies should expect to see a 20-30 percent increase in labor costs.
As a result, those companies have prepared to make major changes that will hurt the very people the law was supposed to help. Workers will first lose the flexibility that has come to define gig-economy work, as businesses have said they will need to start scheduling workers in tight shifts. And a multitude of operators will be laid off entirely. Under a 40-hour workweek, Lyft expects to kick 300,673 drivers to the curb if it experiences the more modest 20 percent increase in expenses, according to a Beacon Economics LLC study commissioned by the ridesharing company.
As it currently stands, gig-economy businesses present some of the lowest barriers to entry, providing opportunities to lower-skilled, vulnerable populations. Lyft, for instance, merely requires that would-be drivers meet regional age standards, pass a background check, and have insurance, a license, and a decent four-door vehicle. The new regulations, howe
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