People v. Uber Technologies, Inc.

Facts

Uber and Lyft operate smartphone applications that connect riders with drivers, and they classify their drivers as independent contractors. (56 Cal.App.5th at pp. 273–274.) Each company characterizes itself not as a transportation provider but as a “multi-sided” technology platform, describing drivers and riders alike as “users” of its software — and contends the drivers are its customers, who render services to other customers (the riders), rather than workers who render services to the company. (Id. at p. 274; see id. at pp. 287–288.) The People — the Attorney General together with the city attorneys of Los Angeles, San Diego, and San Francisco — alleged that this classification violates Assembly Bill 5 and the Unfair Competition Law, depriving drivers of employee protections and undercutting compliant competitors. (Id. at pp. 271–272.)

Procedural history

The San Francisco Superior Court (Schulman, J.) granted the People’s motion for a preliminary injunction on August 10, 2020, staying it briefly to permit appeal. (56 Cal.App.5th at p. 271; see id. at pp. 285–286.) The Court of Appeal stayed the injunction pending its decision and then affirmed, dissolving the stay upon issuance of the remittitur and affording the companies up to 30 days to comply. (Id. at pp. 271, 297–298.) Because the appeal arose from a preliminary injunction, the court reviewed only for abuse of discretion, deferring to supported factual findings and reviewing legal questions de novo. (Id. at p. 286; Hunt v. Superior Court (1999) 21 Cal.4th 984, 999.)

Issue

Did the People show a reasonable probability of prevailing on the merits — specifically, that under prong B of the ABC test codified in Labor Code section 2775 the drivers perform work within the usual course of the companies’ business — sufficient to support a preliminary injunction; and did the trial court correctly reject the companies’ argument that a threshold “hiring entity” inquiry must precede application of the ABC test? (56 Cal.App.5th at pp. 287–292.)

Holding

Reasoning

1. The ABC framework and the burden. Section 2775 presumes that a person “provid[ing] labor or services for remuneration” is an employee, a presumption the hiring entity may rebut only by proving all three ABC conditions. (56 Cal.App.5th at p. 287; Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903, 955–958.) Dynamex places the burden on “the hiring entity to establish that the worker is an independent contractor.” (Id. at p. 957.)

2. Rejecting the threshold “hiring entity” gateway. The companies argued that a court must first decide whether they are “hiring entities” — i.e., whether drivers render services to them or to riders — before reaching the ABC factors. The court declined to import that two-step gloss from out-of-state authority, reading “hiring entity” in Dynamex and section 2775 as a deliberately neutral, expansive term that “does not presuppose an answer one way or another.” (56 Cal.App.5th at pp. 287–288.) More fundamentally, the argument “rests on a false dichotomy”: a worker’s services “may be rendered both to the hirer and to a third party, benefitting each one,” just as the delivery drivers in Dynamex served both the dispatcher and its shippers. (Id. at p. 288.)

3. Prong B and the “platform” defense. Turning to prong B — whether the worker performs work “outside the usual course of the hiring entity’s business” — the court found the trial court’s likelihood determination well supported. The companies’ insistence that they are “simply … technology compan[ies]” rather than transportation businesses did not, on this record, negate the conclusion that drivers’ services lie within the usual course of their business. (56 Cal.App.5th at pp. 290–292.) Reading the breadth of “hiring entity” together with “the conspicuous absence of an express exemption for ride-sharing companies” in Assembly Bill 5, the court had “little doubt the Legislature contemplated that those who drive for Uber and Lyft would be treated as employees under the ABC test.” (Id. at p. 297.)

4. The remaining injunction factors. Having sustained the likelihood-of-success finding, the court agreed the equities and public interest supported relief and that the companies had not shown the trial court abused its discretion in weighing the harms, affirming the injunction with a compliance runway. (56 Cal.App.5th at pp. 292–298.)

Significance

People v. Uber was the most consequential early application of the Dynamex/Assembly Bill 5 framework to the gig economy and a key node in the classification arc — Dynamex (ABC test) → Assembly Bill 5 (codification, Lab. Code, § 2775) → People v. Uber (enforcement) → Proposition 22 (electoral carve-out) → Castellanos (constitutional validation). Its enduring doctrinal contributions are two: it forecloses a freestanding “hiring entity” threshold that defendants used to escape the ABC test, and it treats prong B as the decisive battleground, rejecting the “platform/marketplace” characterization as a basis to avoid employee status. Its practical reach for app-based drivers, however, was overtaken by Proposition 22; the prong-B analysis remains fully applicable to workers and industries outside that carve-out and to pre-Proposition 22 conduct.

Key quotes

“Although we need not conclude that Uber and Lyft’s position that they are not in the transportation business is frivolous, we find no abuse of discretion in the trial court’s conclusion that the People have shown a probability of prevailing on the merits based on prong B.” (People v. Uber Technologies, Inc., supra, 56 Cal.App.5th at p. 292.)

“Based on the breadth of the term ‘hiring entity’ as well as the conspicuous absence of an express exemption for ride-sharing companies in the statutory scheme enacted by Assembly Bill 5, we have little doubt the Legislature contemplated that those who drive for Uber and Lyft would be treated as employees under the ABC test.” (Id. at p. 297.)

Read the full opinion (official slip opinion) →

Practice pointer

Open questions

Because the appeal arose from a preliminary injunction, the court assessed only likelihood of success, not the ultimate merits, and expressly left the final classification determination for further proceedings. (56 Cal.App.5th at p. 292.) The decision also predates Proposition 22, which reclassified covered app-based drivers and was later upheld in Castellanos; the opinion therefore now governs primarily outside the Proposition 22 carve-out. How aggressively prong B applies to genuinely multi-sided platforms in other sectors — and where the line falls between a platform that merely connects users and one whose usual course of business is the underlying service — remains a developing question.