Cloudy Future for Pending Worker-Classification Suits

The initiative’s victory further fragments the landscape of industries subject to California’s worker-classification law, AB 5.

Shannon Liss-Riordan. (Photo: Jason Doiy/ALM)

The lawyer best known for challenging the worker-classification practices of gig-economy companies was pondering her legal options Wednesday.

California voters on Tuesday approved Proposition 22, an initiative freeing app-based ride-hailing and delivery companies from state law requiring them to classify their drivers as employees. The measure’s decisive victory clouded the future of an unknown number of pending worker-classification lawsuits, including those brought by Boston plaintiffs attorney Shannon Liss-Riordan.

“At this point, those cases are really going to be about collecting damages up until the time Prop 22 takes effect,” said Liss-Riordan, name partner at Lichten & Liss-Riordan.

Liss-Riordan had harsh words for Uber, Lyft, Postmates, DoorDash, and Instacart, which together spent more than $200 million to pass Proposition 22. “The gig economy companies could not get what they wanted from the courts or the legislature, so they funded the most expensive ballot campaign in history,” she said. “My hope is that elsewhere in the country public policymakers will see what these companies accomplished in California. For today, they won the information war.”

With their win Tuesday, the tech companies solidified their business plans, which rely on a large source of independent contractors who do not receive the costly array of state-mandated benefits and workplace protections that employees do. They also blocked a potentially expensive source of future litigation, while dealing a blow to organized labor’s hopes to expand worker-friendly regulations to the on-demand industry nationwide.

Proposition 22 will offer some benefits to drivers, such as guaranteed pay equal to 120 percent of minimum wage—but only for the time they’re engaged by the app, not for the time they spend waiting for a task. State lawmakers can amend the new law, but only with the approval of a nearly 90 percent super majority in both houses, an effectively unattainable level of support for controversial issues.

“Californians sided with drivers, recognizing the importance of flexible work and the critical need to extend new benefits and protections to drivers,” DoorDash CEO Tony Xu said in a statement. “Now, we’re looking ahead and across the country, ready to champion new benefits structures that are portable, proportional, and flexible.”

The initiative’s victory further fragments the landscape of industries subject to California’s worker-classification law, AB 5. Lawmakers have already exempted specific jobs, from newspaper carriers to real-estate appraisers. And while app-based drivers now have a carveout, the law still applies to numerous other professions that did not secure a legislative exemption and cannot afford a costly ballot initiative.

“I don’t think it’s any surprise the companies now left holding the bag and shouldering the burden of the law were not the initial targets of AB 5,” said Fisher Phillips lawyer Richard Meneghello, who writes the firm’s Gig Economy blog.

Just two weeks ago, California’s First District Court of Appeal affirmed a preliminary injunction requiring Uber and Lyft to classify their drivers as employees. Writing for a unanimous panel, Associate Justice Jon Streeter said the ride-hailing companies “should have come away with an expectation” that they would have to retool their business model after the California Supreme Court issued the employee-friendly “ABC test” in its 2018 Dynamex decision.

The appellate court’s stay on the injunction remains in place for now. Attorneys for Uber and Lyft had not signaled by Wednesday afternoon whether they planned to try to dissolve the stay quickly. The state’s final election results do not have to be certified until December 11.

Proposition 22 does not apply retroactively. Courts will likely be asked to decide, by Liss-Riordan and other lawyers, when (if ever) tech companies were liable for employee-classification violations. An early clue on where courts may go on the issue could come soon from the California Supreme Court, which is considering how far back its Dynamex ruling should reach.

“It’s not like all these lawsuits will all magically disappear once the election results are certified,” Meneghello said.

From: The Recorder