The Ninth Circuit Court of Appeals decision that allowed the app delivery companies challenge to California’s AB5 law to proceed has been vacated, and will be reconsidered by a larger panel.

AB5 set forth a stringent ABC employee/independent contractor test for the purpose of California wage and hour laws, while exempting a number of industries and classes of workers. Uber, an Uber driver, Postmates, and a Postmates driver filed a federal lawsuit in the Central District of California, arguing (among other challenges) that the numerous exceptions demonstrated a bias against app-based delivery companies in violation of the equal protection clause of the 14th Amendment.

The trial court dismissed all the plaintiffs’ claims in the pretrial stage. On appeal, a three-judge panel of the Ninth Circuit partially reversed, finding the plaintiffs plausibly alleged unconstitutional singling out of app-based gig companies based on the numerous exemptions. (See Olson, et al. v. State of California, et al., 62 F.4th 1206 (March 17, 2023).)

The Ninth Circuit, just this month, ordered the case to be reheard en banc and vacated the panel’s decision, removing any precedential effect. (In most federal courts of appeals an en banc panel consists of the entire roster of active judges; because the Ninth Circuit is so large, it usually creates a panel comprising the Chief Judge and ten other randomly selected judges instead.)

Successful equal protection challenges to business regulations have, historically, been extremely rare, and it would not be surprising if the en banc panel reversed the original appellate decision. Nobody should be counting on a judicial annulment of AB5 as a sure or even especially likely outcome.  The fight to strike AB5 will likely have to continue.

For those in the state of California that are considering a shift to an employee model for compliance reasons, Adapt Payroll, an SCI Limited Liability Company, provides the same world-class customer service and professionalism to employee delivery workers that SCI has brought to independent contractor owner/operators for nearly two decades.

Please contact Adapt Payroll at 833-362-3278 for more information.

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