This article originally appeared in the Daily Journal on October 1, 2019.

As anyone who reads the Daily Journal — or virtually any newspaper — knows, California recently enacted a new law that dramatically upends the independent contractor model that has driven the gig economy and many other types of business for a decade or more. Extensive litigation over the statute, Assembly Bill 5, lies ahead. Many if not all issues pertaining to the scope and effect of AB 5 will be brand-new. Litigators wrestling with them for the first time should keep the idea of challenging trial court interpretations of AB 5 by appellate writ in the front of their minds.

Because AB 5 is so new, there is a good chance the California Courts of Appeal may be interested in reviewing the statute by writ so resources need not be wasted on long trials arising from misinterpretations of the law. Those writs may even lead to precedential opinions that clarify AB 5 going forward. 

Thus, AB 5 litigators should think ahead from the start. Some rulings give litigators only 10 days to seek a writ, so trial lawyers should be ready to go at the outset. Of course, if no writ is brought, or the Court of Appeal does not decide the writ, AB 5 legal issues will need to be addressed on appeal — assuming they’ve been effectively preserved in the trial court.

Wherever you raise them, there are a number of major ambiguities in AB 5 that suggest litigation will be complex and may require, at least in early days, extensive writ and appellate practice. Here are seven that litigators may wish to think about:

1. What is the scope of AB 5’s personal jurisdiction?

Does AB 5 apply to a gig worker who does some work in California and some out of state for a non-California company? For example, an independent contractor who begins in another state and drives through California on the way to a third state — does he have a claim against his out-of-state employer under AB 5? In California, a writ petition related to personal jurisdiction needs to be filed in just 10 days, so litigators need to be ready for them.

2. What is the meaning of AB 5’s “ABC” Test?

AB 5 employs the “ABC” test, which is so superficially simple that it begs for interpretation. A worker is an independent contractor if that person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact. He or she must also perform work that is outside the usual course of the hiring entity’s business, and is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. 

AB 5 does not further define these terms, leaving for future litigation such issues as to what “free” from control and direction mean as applied to a daily or weekly schedule, or whether some independent contractors have their own businesses. For example, some experts opine that the “usual course” of business for gig economy apps is actually tech innovation in algorithms, not transportation or delivery services, and so those types of companies would not run afoul of AB 5 even under their current business models.

Courts will also have to decide which municipal codes apply. With 21 separate minimum-wage rates in the Bay Area, for example, how does a ridesharing service pay a driver who drives a customer from San Francisco ($15.59) to Oakland ($13.80)? Which municipality’s minimum wage law applies to a waiting driver — the municipality where the driver dropped off the last passenger, picks up the next passenger, or the one where the driver parks while waiting? And if a driver works for more than one gig economy company, which company employs that driver while the driver waits for the next customer? 

These questions are best addressed before trial but after discovery is completed. In a summary adjudication/summary judgment motion, litigators will need to show that the established facts lead to one legal conclusion. If you lose the motion, you may have only 20 days to file a writ petition — and the time limit is jurisdictional.

3. What about the alternative test?

If a worker’s status cannot be determined under the ABC rule, courts must apply the rule set forth in S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989). Borello is a workers’ compensation case that presents a complex test combining common law and the statutes of other states to divine which status better effectuates AB 5’s underlying legislative intent and objective. Litigators may want to establish whether the ABCor Borello test applies at the outset of litigation by demurrer or motion to strike. 

4. How do the statutory carve-outs & specific criteria apply?

Apart from its explicit tests, AB 5 has a long list of occupations and professions that are exempted from those tests, and instead are almost always categorized as either independent contractor or employee. A licensed professional (e.g., a lawyer or doctor) is independent. So is a “commercial fisherman” working on an American — but not foreign — vessel. 

A salesperson is an employee. A delivery truck driver is an employee, except if the driver delivers milk. AB 5 does not set forth a category for a driver who delivers, on the same truck, both milk and milk-substitutes or non-dairy beverages. 

Litigators should establish which criteria apply to their case as early as possible before trial, whether by demurrer, motion to strike, or summary adjudication/summary judgment. Be ready to seek a writ if the trial court rules against you; the last thing you want to do is go through an expensive trial with the wrong test. 

5. What about the exceptions to the exceptions?

The AB 5 authors recognized that, with some occupations, it is harder to characterize a worker’s status than in others. So AB 5 has a long list of “sometimes” employees, including certain artists and photojournalists, with their status dependent on the wording of the specific governing contract under which the services are to be delivered. Hairdressers and barbers have their own set of rules, as do real estate agents. 

A partner is an independent contractor, unless the partner receives “wages,” and AB 5 does not further define wages. A freelance writer, editor, or newspaper cartoonist is independent if the newspaper does not accept more than 35 submissions on the same topic per year from that person, but a “submission” remains undefined. As for the construction industry, a list of criteria, plus the Borello standard, are used to judge the status of construction workers —but not of construction drivers

And for the more than 70,000 franchise businesses employing over 700,000 workers in California, AB 5 does not resolve which workers—including franchisees—are employees. 

Litigators will want to define the worker’s status as soon as they can, and get it locked down before trial.

6. What about inconsistencies with federal law?

The National Labor Relations Board classifies gig workers as independent contractors, exempt from the right to unionize. A milk delivery truck driver is an employee under federal law, but not under AB 5. The interplay between state and federal law on these issues can and should be resolved at the pleadings stage, with appellate court involvement by writ wherever needed.

7. When is AB 5 effective and is it retroactive?

It is unclear when different provisions of AB 5 take effect and which are retroactive. So unclear that, a few days after Governor Gavin Newsom signed AB 5, the 9th U.S. Circuit Court of Appeals certified the issue retroactivity to the California Supreme Court. Litigators may want to move on these issues pretrial to set them up for a writ petition. Given the uncertainty of the law on these critical questions, immediate review may well be warranted.

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Trial litigators, you have your AB 5 work cut out for you. But pretrial motions followed by writ petitions can narrow the issues and focus on the pertinent facts, helping you make the best possible case for your client, whether you pursue or defend an appeal. Consider bringing a specialist in writs and appeals on to your case early to tee these issues up best as possible and ensure you don’t miss any statutory writ deadline. Whether as part of a writ or appeal, courts will need to answer all these questions (and surely more) eventually. 

Sharon Baumgold is of counsel with the California Appellate Law Group LLP*, an appellate boutique with offices in San Francisco and Los Angeles. She spent nearly four decades as a lead writ attorney in the 2nd District of the California Court of Appeal in Los Angeles. Find out more about Sharon and the California Appellate Law Group LLP at Appellate Zealots is a monthly column written by the attorneys of the California Appellate Law Group LLP.

*In July 2022, the California Appellate Law Group was renamed the Complex Appellate Litigation Group.

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