The GigReporter

California’s AB5 bill, setting forth a strict independent contractor/employee test for many businesses, has been subject to a constitutional challenge that may soon head to the Supreme Court. Postmates and Uber, together with some drivers that work with them, filed a lawsuit contending that AB5’s numerous exceptions effectively single them out for harsher treatment, in violation of the equal protection clause of the Fourteenth Amendment. The state moved to dismiss the case and an en banc panel of the 9th Circuit Court of Appeals granted the motion1, and the plaintiffs are now requesting the Supreme Court hear an appeal, albeit on narrow grounds concerning tensions between the standards of review for equal protection claims and for deciding preliminary motions to dismiss.

Equal protection challenges to economic regulations such as AB5 are evaluated under the extremely forgiving rational basis test, under which legislation is deemed constitutional so long as there is a permissible government purpose that could justify it. Note “could”; it does not need to be proved that the permissible purpose is what actually motivated the legislation.

On the other hand, when a court hears a preliminary motion to dismiss for failure to state a claim, like the one at issue in Olson, it is supposed to limit its analysis, treating the complaint’s allegations and true and not considering a factual record beyond the complaint. There is then a question that arises when there is a preliminary motion to dismiss in an equal protection case: Should the court consider possible government purposes outside or even contrary to the allegations of the complaint when deciding the motion, or must they wait until later in the process after the record has been developed?

The federal circuit courts of appeal have split on this issue, with the Ninth Circuit now joining the Second and D.C. Circuit on one side while five others have decisions putting themselves on the other. Such differences of opinion among the circuit courts make it more likely the Supreme Court will decide to hear the appeal, although it’s still far from certain. (The high court has mostly unfettered discretion to decide what cases it hears, and it has been criticized for taking too few cases for decades.) Even if the appeal is heard and the app companies win, it will only return the case to lower courts for further proceedings; the historical hostility of the federal judiciary to enjoining economic regulations on equal protection grounds means that ultimately prevailing after the development of a factual record, whether at summary judgment or at trial, remains unlikely.