People v. Uber Technologies, Inc.People v. Uber Technologies, Inc.
This reminder that the foundation of interim injunctive relief lies in equity comes from Justice Ruth Bader Ginsburg, who was renowned for her expertise in procedure long before she became the national icon known as RBG. What Justice Ginsburg says in Winter, though put forward on a point of federal law in dissent—a dissent that would have affirmed as within a trial judge‘s considered discretion the issuance of a preliminary injunction in favor of a private party against an alleged violation of a federal statute by the Navy—happens to capture the essence of California law on the same point. (Butt v. State of California (1992) 4 Cal.4th 668, 678 (Butt) [a trial court‘s decision to issue preliminary injunctive relief “must be guided by a ‘mix’ of the potential-merit and interim-harm factors; the greater the plaintiff‘s showing on one, the less must be shown on the other to support an injunction“].) Justice Ginsburg‘s cogent explanation of the governing standard as one that rests on a “sliding scale” calculus expresses a principle that will ultimately drive our analysis of this case.
We have before us a civil enforcement action brought by the People1 against defendants Uber Technologies, Inc. and Lyft, Inc. (Uber and Lyft). Compared to Winter, the roles of the parties are reversed: It is the government that seeks interim injunctive relief against private parties. The core allegation in the case is that Uber and Lyft improperly misclassify drivers using their ride-hailing platforms as independent contractors rather
A. Legal Framework—Assembly Bill 5
In 2019, the Legislature enacted Assembly Bill 5 (AB 5), which codified the decision of our high court in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903 (Dynamex). (See Stats. 2019, ch. 296, § 1.) As currently found in
Centrally at issue in Dynamex was whether, for purposes of class certification in class action litigation, it was possible to determine on a classwide basis whether drivers who delivered packages for a “nationwide same-day courier and delivery service” offering “on-demand, same-day pickup and delivery services to the public generally” as well as to “a number of large business customers” were employees or independent contractors. (Dynamex, supra, 4 Cal.5th at p. 917.) On-demand drivers were paid “either a percentage of the delivery fee paid by the customer on a per delivery basis or a flat fee basis per item delivered” (ibid.), were required to make deliveries in their own vehicles (ibid.) and were obligated to pay all costs of operating those vehicles (ibid.). But they had the flexibility to set their own schedules, subject to requirements that they notify Dynamex when they intended to work and that, while working, they wear Dynamex uniforms and display its trade dress. (Id. at p. 918.) They were not required to accept delivery assignments; they were “generally free to choose the sequence in which they w[ould] make deliveries and the routes they w[ould] take“; and “when they [were] not making pickups or deliveries for Dynamex, drivers [were] permitted to make deliveries for another delivery company, including the driver‘s own personal delivery business.” (Ibid.)
The case arose in the wage and hour context, with the original named plaintiff‘s complaint alleging that Dynamex “improperly failed to comply with the requirements imposed by the Labor Code and wage orders for employees with respect to” its drivers. (Dynamex, supra, 4 Cal.5th at p. 919.) The plaintiff driver asserted claims for unfair competition and for violation of wage and hour protections in the Labor Code. (Ibid.) All of these claims were
In what can fairly be described as a landmark opinion, our Supreme Court unanimously held that this issue was amenable to proof on a classwide basis. In so holding, the court carefully traced the state of the law governing “whether an individual worker should properly be classified as an employee or, instead, as an independent contractor” (Dynamex, supra, 4 Cal.5th at p. 912), historically a vexed question in federal and state law and one that the court acknowledged “has considerable significance for workers, businesses, and the public generally.” (Ibid.) Taking up a legal issue that had been left open in Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 531 (Ayala), the court addressed whether the “suffer or permit” to work definition announced in Martinez v. Combs (2010) 49 Cal.4th 35 should apply for purposes of class certification. (Dynamex, at pp. 941–942, 943–944.) Martinez adopted a broad, pro-worker test as set forth in the “suffer or permit to work” definition of the terms “employer” and “employee” for purposes of California wage orders. (Dynamex, at pp. 935–939.) An alternative approach, urged by defendant Dynamex as “the only appropriate standard under California law for distinguishing employees and independent contractors” (id. at p. 915), was to construe those terms under the common
The court chose the suffer or permit to work definition and affirmed an order of class certification on that basis. (Dynamex, supra, 4 Cal.5th at pp. 941–950, 965–967.) Tracing the origin of this “exceptionally broad” standard (id. at p. 952) to federal wage and hour legislation sponsored in 1937 by then-Senator Hugo Black (id. at p. 951)—who described it as ” ‘the broadest definition’ that has been devised for extending the coverage of a statute or regulation to the widest class of workers that reasonably fall within the reach of a social welfare statute” (ibid.)—the court explained that the “suffer or permit to work standard in California wage orders finds its justification in the fundamental purposes and necessity of the minimum wage and maximum hour legislation in which the standard has traditionally
All parties in this case acknowledge that AB 5 codified the holding in Dynamex, thus putting a legislative imprimatur on what our Supreme Court held there.5 But it is also significant to note that the Legislature went
B. Defendants’ Businesses and Relationship with Drivers
Both Uber and Lyft offer mobile phone applications (apps) that operate by matching those in need of a ride to ride-hailing drivers available to give them rides using their own vehicles. Defendants’ business models are
The contracts between defendants and the drivers provide that the relationship between Lyft or Uber, on the one hand, and the drivers on the other, is not one of employment. Rather, the “Platform Access Agreement” for Uber‘s “Rides” platform specifies that the parties’ relationship “is solely as independent business enterprises, each of whom operates a separate and distinct business enterprise that provides a service outside the usual course of business of the other.” Lyft‘s “Terms of Service” provide that the driver and Lyft “are in a direct business relationship, and the relationship between the parties under this Agreement is solely that of independent contracting parties,” rather than an employment or agency relationship, and that Lyft does not control the drivers in their provision of rideshare services.
Uber‘s agreement with drivers recites that Uber has no right to direct or control the drivers; rather, under the agreement allowing drivers to use the Rides platform—i.e., the driver app and associated services—the drivers decide whether to use the app and whether to accept, decline, ignore, or cancel a ride request. Before accepting a ride request, drivers are given a prospective rider‘s ratings, as well as information about the pickup location, requested destination, estimated trip duration, and estimated net fare, and riders may designate a preferred driver as a “favorite.” Although Uber provides navigation software, drivers may use any route they or their passengers choose on a ride. Uber does not limit the number of drivers who use its Rides platform, and it does not schedule them to drive at any particular time. Drivers need not accept any minimum number of rides to use the platform, and they may use any other platform or app in addition to
Lyft similarly does not assign schedules, shifts, or driving areas to drivers. Drivers may use the app as much or as little as they want, including brief periods between other obligations, and they may log into other apps, such as Uber‘s, while using Lyft‘s app. They are free to accept or decline ride requests, and they may use a route of their or the passenger‘s choosing. Lyft does not interview prospective drivers. Around 305,000 drivers used Lyft‘s app in the year leading up to October 1, 2019.
Each defendant ensures drivers meet certain standards before authorizing them to use the defendant‘s platform and hold themselves out as Uber or Lyft drivers. Uber drivers are required to pass criminal background and driving record checks, and they must agree that their vehicles will be properly registered and maintained. Lyft requires its drivers to pass criminal background and driving record checks and to show that they are properly licensed and insured, that they have a right to drive their vehicles, and that their vehicles are in good operating condition and meet safety standards. Lyft limits the age and size of vehicles drivers may use; for instance, they must have four doors and at least five seats, and certain subcompact vehicles are ineligible. It requires vehicles to pass an inspection each year.
Lyft and Uber both prohibit drivers using their apps from accepting street hails, bringing their friends along while providing rides, or receiving payment for rides in cash. Defendants offer incentives for drivers to drive at times when or in areas where there is higher demand.
Defendants may monitor or collect information about drivers’ locations, communications with riders, and driving habits, such as speeding, braking,
Riders pay fares through Lyft‘s and Uber‘s apps, and Lyft and Uber deduct a fee for each ride and remit the remainder of the payment to the driver. Uber and Lyft set the base fare rates and time and distance rates. Uber maintains a bank account for the benefit of drivers, separate from its corporate accounts, into which fares and tips are paid, then transmits to the driver the fare and gratuity less any service fee. Lyft arranges payments through a payment processing service.
Neither Uber nor Lyft compensates drivers for time they are logged on the apps but are not transporting passengers; they do not provide overtime premiums or paid rest periods; they do not reimburse drivers for the expenses necessary to do their work, such as vehicle maintenance, a mobile phone and data usage, or gasoline; and they do not provide workers’ compensation coverage or paid sick days.
Uber and Lyft both encourage riders to obtain transportation through their apps. Uber‘s internet site, for instance, tells potential riders they will receive “[a]lways the ride you want” and “a reliable ride in minutes,” and that they can “[r]equest a ride, hop in, and go.” Lyft‘s web site advertises to potential riders “[t]he whole city. In the palm of your hand,” tells them to “[g]et a ride whenever you need one,” and represents that “[o]ur drivers are always nearby, so you can get picked up, on demand, in minutes.”
Uber has recently made changes to its business practices that it contends are relevant to its relationship with the drivers. Drivers need not accept Uber‘s base fare (or “surge” fare for busier times) but may set a multiplier to the base fare of their choosing, within limits set by Uber. They may also purchase “Drive Pass,” a subscription that entitles them to a
Uber and Lyft each take the position that the drivers do not provide services to them and are not their employees, but instead are independent business people who pay for the use of their platforms to find opportunities to earn money. Lyft describes its business as “a multi-sided transportation platform that connects people who are looking for rides with drivers willing to provide them.” Its business, it asserts, is not providing rides, but “operating the software tools and a platform that connects riders and drivers.” Lyft describes both drivers and riders as users of its business.
Similarly, Uber describes itself as a technology company that develops and maintains “multi-sided platforms,” or “digital marketplaces where providers or sellers of a good or service can connect with consumers of that good or service.” Its platforms, Uber asserts, “provide users (both the sellers and buyers) with various services, including matching and payment processing,” although it does not guarantee that all users will find a match. In addition to the rideshare platform at issue here (Rides), those services include food delivery (Uber Eats) and freight (Uber Freight). And its employees, Uber contends, are those who work on its technology and provide support services, not the drivers who use its products to find and receive compensation from passengers.
C. Procedural History
The People brought this action alleging that Uber and Lyft are transportation companies in the business of selling rides to customers and that their drivers are employees under Dynamex and AB 5. By misclassifying drivers as independent contractors, thus depriving them of the benefit of minimum wages, overtime pay, reimbursement for business expenses,
Shortly after filing their complaint, on June 25, 2020, the People moved for a preliminary injunction enjoining defendants from continuing this practice, and prevailed. Granting the People‘s motion, the trial court restrained Lyft and Uber, during the pendency of this action, from “classifying their Drivers as independent contractors in violation of [AB 5],” and from “violating any provisions of the Labor Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare Commission with regard to their Drivers.” The court concluded the People had shown “a reasonable probability (indeed, an overwhelming likelihood)” of prevailing on the merits of their claim that Uber and Lyft were misclassifying their drivers as independent contractors in violation of AB 5; that substantial public harm would result in the absence of an injunction; and that the harm to defendants from erroneous entry of the injunction would not be grave or irreparable and would not outweigh the harm to drivers, businesses, and the general public in the absence of an injunction.
The trial court issued its injunctive order on August 10, 2020, staying it for ten days to allow defendants to seek appellate relief. Defendants appealed and petitioned this court for a writ of supersedeas. On August 20, 2020, we granted the petition and stayed the order during the pendency of
II. DISCUSSION
A. Legal Standards for Preliminary Injunction
The decision whether to issue a preliminary injunction lies in the sound discretion of the trial court, which we do not disturb absent an abuse of discretion. (Hunt v. Superior Court (1999) 21 Cal.4th 984, 999 (Hunt); City of Corona v. AMG Outdoor Advertising, Inc. (2016) 244 Cal.App.4th 291, 298 (City of Corona).) On appeal we do not weigh conflicting evidence, but defer
The trial court‘s order on a request for a preliminary injunction “reflects nothing more than the superior court‘s evaluation of the controversy on the record before it at the time of its ruling; it is not an adjudication of the ultimate merits of the dispute.” (People ex rel. Gallo v. Acuna (1997) 14 Cal.4th 1090, 1109 (Gallo); accord, Yee v. American National Ins. Co. (2015) 235 Cal.App.4th 453, 457–458.) The preliminary injunction is intended to “preserv[e] . . . the status quo until a final determination of the merits of the action.” (Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 528.)
In general, when considering a request for a preliminary injunction, the trial court weighs two interrelated factors. The first is the likelihood the party seeking relief will prevail on the merits, and the second is the relative interim harm to the parties if the preliminary injunction is granted or denied. (Butt, supra, 4 Cal.4th at pp. 677–678; Hunt, supra, 21 Cal.4th at p. 999; IT Corp., supra, 35 Cal.3d at pp. 69–70.) The goal is to minimize the harm that an erroneous interim decision would cause. (IT Corp., at p. 73.)
IT Corp. established a variation of this standard where a legislative enactment—there, a zoning ordinance—specifically provides for injunctive relief. (IT Corp., supra, 35 Cal.3d at pp. 66, 72–73.) The IT Corp. standard is highly pertinent here because AB 5 specifically authorizes the Attorney General or a city attorney or prosecutor to bring “an action for injunctive
The injunction at issue in IT Corp. restrained a company from disposing of unauthorized wastes at a particular site, in violation of a zoning ordinance that specifically authorized injunctive relief. (IT Corp., supra, 35 Cal.3d at pp. 68–69.) In affirming the injunction, our high court concluded that the traditional balancing test should be adapted in such a circumstance. (Id. at p. 72.) The appropriate standard, the court explained, is as follows: “Where a governmental entity seeking to enjoin the alleged violation of an ordinance which specifically provides for injunctive relief establishes that it is reasonably probable it will prevail on the merits, a rebuttable presumption arises that the potential harm to the public outweighs the potential harm to the defendant. If the defendant shows that it would suffer grave or irreparable harm from the issuance of the preliminary injunction, the court must then examine the relative actual harms to the parties.” (Id. at p. 72, fn. omitted; see Water Replenishment Dist. of Southern California v. City of Cerritos (2013) 220 Cal.App.4th 1450, 1464 [since city did not establish it would suffer grave or irreparable harm from injunction, no need to weigh relative harms].) In carrying out this weighing, “an injunction should issue only if—after consideration of both (1) the degree of certainty of the outcome on the merits, and (2) the consequences to each of the parties of granting or denying interim relief—the trial court concludes that an injunction is proper.” (IT Corp., at p. 72.)
Defendants argue the rule of IT Corp. is limited to prohibitory injunctions, and that it is inapplicable here because the injunction is mandatory, that is, it requires them to perform affirmative acts (such as changing their contractual relationship with their drivers or ceasing
The trial court rejected this argument, concluding first, that an injunction that restrains a continued violation of state law is prohibitory in nature (see People ex rel. Brown v. iMergent, Inc. (2009) 170 Cal.App.4th 333, 342 [prohibition on continued violation of consumer protection laws]), and second, that the IT Corp. framework applies even where the injunction authorized by statute is mandatory. The parties continue to debate vigorously whether the injunction issued here is prohibitory because it merely restrains defendants from further violations of state law, or is mandatory because it requires defendants to take affirmative actions that will change the status quo in order to comply with the injunction.
While the question whether the injunction is mandatory or prohibitory is complicated and not free from doubt on this record, we conclude it is ultimately academic here.16 Nothing in IT Corp. suggests its framework is
We are guided by City of Corona, supra, 244 Cal.App.4th 291. The trial court there entered a preliminary injunction ordering the defendants to remove a billboard installed without a permit, pursuant to an ordinance that allowed abatement actions. (Id. at pp. 294, 296–297.) In reviewing the order, the appellate court acknowledged both the rule that a preliminary injunction that “mandates an affirmative act that changes the status quo . . . is scrutinized even more closely on appeal” and is granted only if the right is clearly established (id. at p. 299, citing Stender, supra, 212 Cal.App.4th at p. 630), and the rule that “a more deferential standard of review applies when the government is seeking to enjoin the violation of an ordinance” (City of Corona, at p. 299, citing IT Corp., supra, 35 Cal.3d at pp. 69–71, 73, and City of Claremont v. Kruse (2009) 177 Cal.App.4th 1153, 1166 (Kruse)).
Defendants urge us to reject the IT Corp. standard, citing Stender, which considered an injunction requiring a lawyer and law firm to provide notice to clients that another lawyer from the firm had resigned with disciplinary charges pending, and to follow specified procedures in so doing (such as providing two copies of the notice within 30 days with a self-addressed stamped envelope, retaining returned copies of the notice, and including translations into three languages). (Stender, supra, 212 Cal.App.4th at pp. 619, 628–629.) The injunction was issued pursuant to
Here, as the trial court noted, AB 5 expressly authorizes injunctive relief to prevent misclassification of employees. (
We therefore proceed to the first step of the IT Corp. analysis, which asks whether plaintiff has shown a reasonable probability it will prevail on the merits. (IT Corp., supra, 35 Cal.3d at p. 72.)
B. Reasonable Probability of Prevailing on the Merits
The crux of this lawsuit is whether, under the ABC test as adopted in Dynamex and codified in
1. The ABC Test and the “Hiring Entity” Issue
Uber and Lyft argue the threshold question in an ABC analysis is whether they are “hiring entities.” Only if they are, they argue, does the court move on to consider whether the three ABC test factors are satisfied. They frame the “hiring entity” issue in this manner because, fundamentally, the case they make here rests on the theory that the drivers do not render services to them; rather, drivers are their customers, who render services to defendants’ other customers, the riders, using the two-sided platforms defendants developed. Pre-Dynamex out-of-state cases applying the ABC test describe a slightly different threshold inquiry: whether the worker “provided services” to the putative employer. Gallagher v. Cerebral Palsy of Massachusetts, Inc. (Mass.Ct.App. 2017) 86 N.E.3d 496, 499 (Gallagher), for instance, describes a “two-step inquiry“: first, whether the worker provided services to the putative employer and second, the three-part test allowing the putative employer to rebut the presumption of employment by proving the
We reject defendants’ invitation to import a threshold “hiring entity” inquiry into
But even aside from defendants’ reliance on unpersuasive out-of-state authority, we reject their “hiring entity” argument on the merits because it rests on a false dichotomy. In defendants’ proffered mode of “hiring entity” analysis, we must first decide whether drivers’ services are rendered to riders, or to them, before applying the remainder of the ABC test. That, in our view, presents an artificial choice. What the argument masks is that drivers’ services may be rendered both to the hirer and to a third party, benefitting each one. In Dynamex itself, for example, the delivery services that drivers performed could have been characterized as having been carried out for the benefit of both the corporate dispatcher, Dynamex, and the shippers and recipients of packages. There was no suggestion in that case of
Reading the term “hiring entity” in context, we think the phrase is used in Dynamex and in
Most fundamentally, to make the determination of whether the party acquiring a worker‘s service is a “hiring entity” an additional step in the ABC test—an analytical move that, in effect, creates a step zero and pretermits further analysis unless answered in the affirmative—is inconsistent with the holding in Dynamex: As our Supreme Court carefully delineated in that case, there are three steps to the ABC test, these steps may be considered in any
Joined by a number of their supporting amici, defendants contend that, without an inquiry at the outset into whether they are “hiring entities,” there is the potential that the ABC test may be invoked and employment status will be found in myriad situations involving online marketplaces and routine commercial transactions. We view the handwringing over this prospect as overdrawn. Defendants are correct that there is a threshold test designed to prevent wholly inappropriate application of the ABC test, but it is not whether the putative employer is a “hiring entity.” The Legislature explicitly exempted numerous business sectors, professions, and commercial relationships from the scope of
a. Uber‘s Showing
Uber and Lyft both submitted expert and other evidence they contend show they provide services to the drivers, rather than employing them. Uber describes its Rides platform as a method for riders to connect with available drivers through its multi-sided platforms. Its “proprietary algorithm takes the inputs from riders and drivers, and uses that information to suggest optimum matches based on proximity,” after which Uber provides information to both driver and rider about how they have been rated on past rides, using its “bilateral rating system.”
One of Uber‘s expert witnesses, Dr. Terrence W. August, a business school professor whose expertise includes economic modeling, the economics of information systems, and operations management, described multi-sided platforms as “a type of business that facilitates transactions between two or more different groups such as purchasers and sellers,” who would not be able to find each other easily otherwise. Such platforms commonly provide services such as “‘[m]atching’ market participants on one side of the market to participants on the other side of the market in order to facilitate a transaction,” payment processing, collecting and processing information to support successful matching, providing sellers and purchasers with suggestions and information on pricing, and “[c]ommunicating and verifying the quality of market participants in order to facilitate more and better transactions.” Dr. August opined that Uber‘s Rides platform is a two-sided market app that provides services in a fashion similar to other multi-sided platforms by matching drivers and riders, and that both riders and drivers “are customers of—rather than employees working on behalf of—the platform.”
Another expert, Dr. Justin McCrary, a law professor and economist with expertise in economic modeling and econometric and statistical methods, opined that Uber‘s matching service “is supported by advanced technology and technical employees,” and that Uber has “several distinguishing features that improve market efficiency and benefit both passengers and drivers“: there is a “relatively quick and easy enrollment process“; drivers may choose their own schedule and locations; drivers may simultaneously use other platforms’ apps to find leads; and Uber uses advanced technology to match driver supply with passenger demand efficiently. Dr. McCrary characterized Uber as a “network company” that “connects independent service providers and consumers, where the independent service provider is hired by the consumer to provide a one-time service.” He noted that many Uber drivers value having control over their own schedules, and pointed to evidence that more than half of Uber‘s drivers work 12 hours or fewer per week, and less than 20 percent work more than 30 hours a week; that drivers’ schedules vary considerably from week to week; and that many drivers for Uber and other networks engage in other
b. Lyft‘s Showing
Lyft‘s Director of Data Science explained that its predecessor company, Zimride, began as an electronic message board for students to arrange carpools home from college. Lyft‘s current platform was launched in 2012, and “allows users to arrange shorter distance rides on a peer-to-peer basis on demand.” Lyft‘s business, he explained, is “operating the software tools and a platform that connects riders and drivers.”
Lyft sees its drivers as users of its platform, and takes the position it does not receive services from them. Rather, it allows drivers to use their “spare time and unused seat capacity” to earn extra money. Lyft does not assign schedules or coverage areas, and drivers may switch between Lyft and any other platforms, including Uber. The value of the platform to users on one side of the platform—drivers or riders—increases as more users are added on the other side.
Lyft‘s technology matches drivers and riders by taking into account various factors, including distance between driver and rider, and it reduces the effort riders and drivers need to connect with each other. Drivers receive incentives to log in at times or places with higher demand, and riders may receive price discounts when the supply of drivers outstrips demand. Lyft offers payment-processing services that “reduce friction” between drivers and riders by requiring riders to have a payment method associated with their account and processing payments to drivers.
Dr. Catherine Tucker, a business school professor who specializes in the economics of digital technology, testified on behalf of Lyft that a multi-sided platform acts as “a matchmaker or intermediary for distinct groups of
Dr. Tucker also testified that a flexible schedule is important to 91 percent of the drivers who use Lyft‘s platform, and that most drive only in “short bursts,” with more than half of driving sessions lasting less than an hour and 84 percent less than three hours. Drivers earned more than $20 per hour on average in 2019 after taking into account the cost of fuel, maintenance, and depreciation per mile, and they would rarely have qualified for sick leave or overtime pay if they were employees.
c. Analysis
To prevail on their claim that the drivers are not their employees, defendants must establish that all three ABC factors apply. (Dynamex, supra, 4 Cal.5th at p. 963.) The trial court addressed only the second of these factors, that is, whether “[t]he person performs work that is outside the usual course of the hiring entity‘s business” (
Our high court has explained this factor, prong B of the ABC test, as follows: “Workers whose roles are most clearly comparable to those of employees include individuals whose services are provided within the usual course of the business of the entity for which the work is performed and thus who would ordinarily be viewed by others as working in the hiring entity‘s business and not as working, instead, in the worker‘s own independent
A number of cases have considered contentions that ride-sharing companies such as Lyft and Uber are in the business solely of creating technological platforms, not of transporting passengers, and have dismissed them out of hand. In 2015—before our high court adopted the ABC test in Dynamex—the Northern District of California addressed whether Lyft should have paid the plaintiffs, former drivers, as employees rather than as independent contractors. (Cotter v. Lyft, Inc. (N.D.Cal. 2015) 60 F.Supp.3d 1067, 1070.) Lyft argued as a threshold matter that the drivers performed services not for Lyft but for the riders, while Lyft merely furnished the platform that allowed riders and drivers to connect. (Id. at p. 1078.) The court concluded, “[T]hat is obviously wrong. Lyft concerns itself with far more than simply connecting random users of its platform. It markets itself to customers as an on-demand ride service, and it actively seeks out those customers. [Citation.] It gives drivers detailed instructions about how to conduct themselves. Notably, Lyft‘s own drivers’ guide and FAQs state that drivers are ‘driving for Lyft.’ [Citation.] Therefore, the argument that Lyft is
Uber has been similarly unsuccessful in making its pitch to the courts. In 2015, the Northern District of California rejected Uber‘s argument that it was not a transportation company but a technology company, concluding this was “an unduly narrow frame,” and that “Uber does not simply sell software; it sells rides.” (O‘Connor v. Uber Technologies, Inc. (N.D.Cal. 2015) 82 F.Supp.3d 1133, 1141.) The court went on, “Even more fundamentally, it is obvious drivers perform a service for Uber because Uber simply would not be a viable business entity without its drivers. [Citations.] Uber‘s revenues do not depend on the distribution of its software, but on the generation of rides by its drivers.” (Id. at p. 1142, fn. omitted.) The court noted that Uber billed its riders directly for the entire amount of the fare charged—in which drivers
Cases considering other companies involved in transporting passengers also provide useful insights. In this state, the court in Yellow Cab Cooperative, Inc. v. Workers’ Comp. Appeals Bd. (1991) 226 Cal.App.3d 1288 (Yellow Cab), considered whether an injured taxi driver was an employee of the company, Yellow Cab Cooperative (Yellow), that leased a cab to him, for purposes of a claim for workers’ compensation. (Id. at p. 1291.) The agreement between the driver and Yellow designated him as a lessee; he leased the cab for 10-hour shifts and paid a flat rate per shift, while Yellow provided telephone call service, radio service, and repair and maintenance service. (Id. at pp. 1291–1292.) The Workers’ Compensation Appeals Board concluded the driver was an employee, and the appellate court upheld the order. (Id. at p. 1291.) In doing so, it rejected Yellow‘s position that the driver was not rendering a service to it when he was injured, stating, “Contrary to Yellow‘s portrayal here, the essence of its enterprise was not
We recognize that defendants’ business models are different from that traditionally associated with employment, particularly with regard to drivers’ freedom to work as many or as few hours as they wish, when and where they choose, and their ability to work on multiple apps at the same time. But some of the features of the delivery-driver model at issue in Dynamex are present here as well. Strip away the use of the internet as a mode of communication with drivers, and this case bears many similarities to that one. The dispositive issue there was not whether the defendant and its drivers followed what might be viewed as a traditional employment model, who may be said to receive the drivers’ services, or how payment was structured, but whether the mode in which the drivers were utilized met the elements of the ABC test. So too in this case. There is considerable evidence that the ride-share drivers involved here meet this test, despite the changes in the traditional workplace enabled by modern technology.
These facts amply support the conclusion that, whether or not drivers purchase a service from defendants, they perform services for them in the usual course of defendants’ businesses. Defendants’ businesses depend on riders paying for rides. The drivers provide the services necessary for defendants’ businesses to prosper, riders pay for those services using defendants’ app, and defendants then remit the drivers’ share to them, either through a bank account in the case of Uber or a payment processing service in the case of Lyft. Arguing to the contrary, defendants reprise the theme that, under the contracts they have with drivers, drivers do not perform services for them but just the reverse—drivers are their customers. Not only is there substantial evidence in the record supporting the trial court‘s rejection of that argument, but it was correct to do so as a legal matter as well under the rule that the parties’ characterization of their relationship is not dispositive because their “actions determine the relationship, not the labels they use.” (Linton, supra, 15 Cal.App.5th at p. 1217.)
None of the cases relied upon by defendants persuades us otherwise. For instance, Lyft cites Ruggiero v. American United Life Ins. Co. (D.Mass. 2015) 137 F.Supp.3d 104, to argue that it provides matching services rather than transportation, but that case was persuasively distinguished in Cunningham. The plaintiff in Ruggiero sold insurance policies for a company that he contended was his employer because the sales were essential to its business. (Id. at p. 118.) Considering the relationship between a defendant who manufactures and administers insurance policies, and a plaintiff who offers the opportunity to buy those policies, the court explained: “Two categories can be discerned from the case law: on the one hand, there are
Defendants also draw our attention to a number of cases from other states in which brokers who matched consumers and workers were not treated as the workers’ employers. (See, e.g., Trauma Nurses, Inc. v. Bd. Of Rev. (N.J.Super.Ct.App.Div. 1990) 576 A.2d 285, 286, 290 [service supplying hospitals with temporary nurses]; State Dept. of Employment, Training & Rehab., Employment Securities Div. v. Reliable Health Care Services Of South Nev., Inc. (Nev. 1999) 983 P.2d 414, 418 [health care worker temporary placement agency; “providing patient care and brokering workers are two distinct businesses“]; Q.D.-A., Inc. v. Ind. Dept. of Workforce Development (Ind. 2019) 114 N.E.3d 840, 843, 847–848 [business connected drivers with customers who needed too-large-to-tow vehicles driven to them]; but see O‘Hare-Midway Limousine Service, Inc. v. Baker (Ill.Ct.App. 1992) 596 N.E.2d 795, 797–798 [business of furnishing chauffeur services constituted employment where limousine drivers paid percentage of commission to
The principal California case the defendants rely upon in support of the argument that their business models meet the requisites of prong B is Curry v. Equilon Enterprises, LLC (2018) 23 Cal.App.5th 289. The issue there was whether a manager at a service station was employed by Shell Oil Products US (Shell) as well as by the service station operator. Shell leased service stations to entities that operated the service stations; Shell owned the gasoline that was sold and received all revenue from fuel sales; and the operators retained all profits from the service stations’ convenience stores and carwash facilities. (Id. at pp. 292–293.) The manager was hired by the service station operator. (Id. at p. 295.) Even assuming that Dynamex extended beyond the independent contractor context to the joint employment context at issue in Curry—a point it questioned—the appellate court concluded there was no triable issue of fact as to prong B of the ABC test, whether the manager‘s work was part of Shell‘s usual course of business. (Id. at pp. 314–315.) The service station operator, not Shell, was responsible for all aspects of the employment relationship, including hiring and compensation, and controlled its employees’ daily work, and Shell did not acquiesce in the manager‘s employment. (Id. at p. 311.) The operator, not Shell, operated the service stations. The court concluded that “Shell was not in the business of operating fueling stations—it was in the business of owning real estate and fuel.” (Id. at pp. 307, 315.) The case before us is readily distinguishable from Curry. This is not a situation in which a putative joint employer leases facilities to a worker‘s direct employer and has
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 AB 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. Indeed, as the trial court pointed out, Uber is currently—and so far, unsuccessfully—challenging the constitutionality of the measure in federal court, arguing that the legislation “irrationally targets gig economy companies and workers.” (Olson v. California (C.D.Cal. Feb. 10, 2020, No. CV 19-10956-DMG (RAOxO)) 2020 U.S.Dist. Lexis 34710, *13–*14.) At oral argument, counsel for Uber confirmed that his client does indeed take this view, though he was quick to add that the Legislature may have “targeted and missed.” While one might quibble with the word “target” given the breadth of the AB 5 statutory scheme, we appreciate the candor, because the legislative history does appear to show an awareness that the misclassification issues AB 5 sought to address are prevalent not just in traditional “brick and mortar” businesses, but in modern technology-driven companies as well.18
Another set of arguments arises from the fact that defendants are regulated by the Public Utilities Commission (PUC) as “transportation network companies” (TNC), defined as “an organization . . . that provides prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle.” (
Defendants contend the trial court‘s evaluation of the merits was based on a misapplication of the statutes governing TNC‘s. As they point out, when identifying the nature of defendants’ businesses for purposes of prong B of the ABC test, the trial court first looked to provisions of the Public Utilities Code establishing TNC‘s as a new category of charter party carriers, and defining charter carriers as “engaged in the transportation of persons” and TNC‘s as “provid[ing] prearranged transportation services for compensation
To the extent defendants argue that the statutory provisions and the PUC‘s regulatory decisions did not decide the issue now before us, we agree, although, to be sure, as the trial court correctly recognized, these rulemaking decisions may be given some limited weight in determining what defendants’ businesses actually entail. (Yamaha Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 7–8 [significance of agency decisionmaking as it bears on judicial construction of statutes, “[d]epending on the context, . . . may be helpful, enlightening, even convincing,” and it “may sometimes be of little worth“]; see New Cingular Wireless PCS, LLC v. Public Utilities Com. (2016) 246 Cal.App.4th 784, 808–810.) Lyft is emphatic that the trial
On a related note, Lyft takes the position that statements in the PUC‘s rulemaking orders show that defendants are not in the transportation business. To a large extent, Lyft takes these comments out of context. For instance, Lyft points to the PUC‘s comment in the 2013 PUC Decision that Uber is “the means by which the transportation service is arranged.” (2013 PUC Decision, supra, 2013 Cal.P.U.C. Lexis 504, at p. *17, italics added.) But this statement was made in the course of rejecting the assertion that TNC‘s “are nothing more than an application on smart phones, rather than part of the transportation industry.” (Ibid.) Similarly, the PUC‘s statement that TNC permits are granted only to “companies utilizing smart phone technology applications to facilitate transportation of passengers in the driver‘s personal vehicle” (id. p. *39, italics added) refers to the means used to connect drivers and passengers, not the nature of a TNC‘s business. Lyft
Uber also points out that some of the practices discussed above—such as ensuring that drivers are properly licensed and insured, ensuring their vehicles are inspected, checking their background and driving history, suspending drivers who use intoxicating substances, carrying out driver training programs, and reporting the number of rides requested and accepted in each zip code—are required by either the governing statutes or the PUC. (See
Viewing the conduct of defendants’ businesses as a whole, we conclude the trial court properly found—based on prong B alone—that there is more than a reasonable probability the People will prevail on the merits at trial. (City and County of San Francisco v. Evankovich (1977) 69 Cal.App.3d 41, 54 [“The substantial evidence rule applies to preliminary injunctions, as well as the additional rule requiring us, when weighing the question of a trial court‘s exercise of discretion in granting a preliminary injunction, to view the facts most favorably to the court‘s disposition“].) We emphasize that our conclusion here is not a final resolution of the merits; that is a matter ultimately to be determined after a full trial. (Gallo, supra, 14 Cal.4th at p. 1109.) At this stage, the trial court‘s task was essentially a predictive one. Balanced against the relative harms of a preliminary injunction issuing—harms that we consider below—we think the court correctly gave the most weight to the People‘s almost “inevitable success on the merits.” (Winter, supra, 555 U.S. at p. 53 (dis. opn. of Ginsburg, J.).) We assess the merits
Compared to the six-factor, fact-bound Borello test for independent contractor status—which can be very difficult for plaintiffs to meet at an early stage of litigation, short of a full-blown trial—the Dynamex court “create[d] a simpler, clearer test for determining whether the worker is an employee or an independent contractor,” one that “presumes a worker hired by an entity is an employee and places the burden on the hirer to establish that the worker is an independent contractor.” (Dynamex, supra, 4 Cal.5th at p. 951, fn. 20.) In applying this test, it is important to bear in mind the procedural posture of the order under review in Dynamex. The case arose on review of a class certification order, on a limited record far less robust than would have been the case upon review of a decision on a trial record. Our Supreme Court affirmed the class certification order as a matter of law, holding that the simplicity of the ABC test made it possible to decide at that early stage in the litigation that common questions were sufficiently predominant to warrant class treatment. The procedural posture here differs, but we take Dynamex as instructive in determining that the ABC test may be applied, and may be applied with confidence, in the context of a motion for interim injunctive relief.
C. Grave Harm to Defendants and Balance of Relative Harms
The next steps in the IT Corp. framework require the trial court to determine whether the defendant has shown it would suffer grave or irreparable harm from the issuance of the preliminary injunction and, if so, to
1. Evidence of Harm if Injunction Granted or Denied
Defendants submitted extensive evidence of the harm they claim would be caused by an erroneous preliminary injunction. Lyft‘s director of data science, Christopher Sholley, testified that an injunction would require Lyft to change its business model. Currently, when drivers are logged into the driver app but not on a ride or on their way to pick up a rider, they may use their time as they wish, including running personal errands or using other platforms. If Lyft were required to compensate drivers for this time, it would need to find ways to control drivers’ time, for instance by having them work in scheduled shifts, at designated times and places, or for multiple hours at a time, in order to direct drivers’ work to times and places with the most demand for rides. Lyft might also need to prohibit drivers from using other platforms, such as Uber, while logged into the app or from unilaterally rejecting or cancelling rides.
Lyft also submitted expert testimony that it would incur significant costs in converting its system to treat drivers as employees, including substantial changes to its “organizational structure, hiring processes, software tools and management systems, and company culture.” For instance, Lyft would have to spend extensive time ensuring each driver filled out the necessary paperwork and verifying their eligibility to work, and it would need employees to supervise the drivers, additional human resources support staff, additional accounting staff, and new recruiting staff. It would need to develop expanded infrastructure technology to run its payroll system for an influx of new employees.
Uber also submitted evidence it would incur substantial costs if it were required to treat drivers as employees. Uber would incur unrecoverable costs such as hiring additional corporate staff to recruit and manage the expanded work force. An injunction would give Uber an economic incentive to reduce the number of drivers, enforce a fixed work schedule, and limit the number of hours each employee could drive in order to reduce overtime costs. A reduced number of drivers would mean fewer rides available during busy times, longer waiting times for rides, and higher prices. And Uber argues its drivers
Both Lyft and Uber submitted declarations by drivers, who variously attested that they use the Lyft and Uber apps to make money on the side, at their own convenience, and that they value or need the ability to set their own work hours. Some use the apps between other work commitments or when they have free time. Some are unable to work a regular schedule, either because of health conditions of their own or their responsibilities for children or ailing family members. Some use the apps to make extra money to pay unexpected bills.20
The People also submitted declarations from Uber and Lyft drivers, some of whom drive long hours but are not paid for overtime work or for rest breaks. They do not receive sick leave or health insurance coverage. Some drivers stated they had difficulty obtaining unemployment benefits during the COVID-19 pandemic because defendants did not report their earnings. Drivers pay for their own vehicles, insurance, gas, inspections (in the case of Uber), and cell phone service. One driver testified that because of the low
2. The Trial Court‘s Findings
The trial court found substantial public harm would result in the absence of an injunction, looking first to the Supreme Court‘s decision in Dynamex, which explained the significance of how a worker is classified: A worker who is properly classified as an employee obtains the protection of applicable labor laws and regulations, including payment of Social Security and payroll taxes, unemployment insurance taxes, workers’ compensation insurance, and enactments governing wages, hours, and working conditions. An independent contractor, on the other hand, gains none of the numerous labor law benefits, and the public may be required to assume additional financial burdens. (Dynamex, supra, 4 Cal.5th at pp. 912–913.) By misclassifying employees as independent contractors, a business may obtain a competitive advantage over others that classify their workers properly; moreover, misclassification “is a very serious problem, depriving federal and
The trial court also noted the declarations of individual drivers attesting to the “precariousness of their financial existence, which is directly attributable to Defendants’ refusal to classify and treat them as employees entitled to protection under California law.” The court concluded defendants had not shown they would suffer grave or irreparable harm from the issuance of a preliminary injunction: although implementation would require defendants to change the nature of their business practices in significant ways, those costs were fundamentally financial. The court recognized the injunction‘s adverse effect on some drivers who desired the flexibility of defendants’ current business model, but noted first, that those drivers who worked for only a small number of hours a week would suffer correspondingly minor effects, and second, that during the current pandemic, many drivers were working less or not at all, further reducing the interim consequences of an injunction. And, even assuming defendants’ showing amounted to grave or irreparable harm, the court concluded it did not outweigh the harm in the absence of an injunction.
3. Analysis
As a threshold matter, the parties dispute whether Uber and Lyft have demonstrated grave or irreparable harm. Defendants argue this type of harm is found in the burden of restructuring their businesses; the loss of goodwill they will suffer from terminating their contractual relationships with many drivers, a prospect they claim is inevitable; the lost income of drivers who are not hired as employees or who will not be able to work on a fixed schedule; and the community‘s loss of transportation options. (See American Trucking Ass‘ns v. City of Los Angeles (9th Cir. 2009) 559 F.3d 1046, 1058 [irreparable harm in incurring large costs in restructuring business and losing customer goodwill].) They feature declarations—from Ron Hamilton, a human resources and business operations expert for Lyft, and from Brad Rosenthal, director of strategic operational initiatives for Uber—attesting to the need to add extensive internal management systems, including vast human resources and related information technology services, to support an employee workforce many times the size they have now. These systems, defendants point out, cannot be added overnight.
The People counter, correctly, that a party suffers no grave or irreparable harm by being prohibited from violating the law (see People ex rel. Reisig v. Acuna (2010) 182 Cal.App.4th 866, 882 [no harm from restrictions on activities that constitute public nuisance]) and that defendants’ financial burdens do not rise to the level of irreparable harm (see IT Corp. supra, 35 Cal.3d at p. 75 [although party would suffer substantial loss of waste disposal and transportation revenues, no showing of grave or irreparable injury because it could still process wastes]). Moreover, the People contend, again correctly, nothing in the preliminary injunction prevents defendants from allowing drivers to maintain their flexibility rather
To the extent defendants base their claim of harm on the plea that the necessary changes cannot be made “on the flick of a switch,” the trial court correctly observed that defendants have had more than two years—since Dynamex was decided—to make the necessary adjustments. The facts in Dynamex, though they arose in a low-tech setting compared to what we have here, bear a number of similarities to those in this case. One could not reasonably read that opinion as of April 2018 and not come away with an expectation that, without legislative relief, the foundation of defendants’ ride-sharing business model, to the extent it was based on treating drivers as independent contractors, would highly likely have to change. The passage of AB 5 in October 2019, obviously, should have heightened the importance of urgent contingency planning for an employment-based model. And when the trial court ordered that change in August 2020, we gave defendants an additional reprieve, putting a stay in place during the pendency of this appeal, subject to the submission of sworn statements from their chief executive officers confirming that implementation plans have been made so the companies will be able to comply if we affirm the injunction and if the governing law is not changed by a proposition on the upcoming November 3 ballot. Given the time that has elapsed since Dynamex was decided, the idea that it was unreasonable for the trial court to expect rapid compliance is untenable.
Nonetheless, for purposes of our analysis—bearing in mind both the evidence of disruption to defendants’ businesses and the fact that we must consider the potential harm caused by an erroneous interim decision (IT Corp., supra, 35 Cal.3d at p. 73)—we shall assume that if the injunction were ultimately determined to have been wrongly entered, the harm to defendants could fairly be considered grave or irreparable. Even with this assumption, however, the trial court did not abuse its discretion in concluding the balance of harms favored the issuance of a preliminary injunction. In the end, it matters—and it matters in a profoundly important way to the bottom-line discretionary calculus—that the Legislature specifically authorized the government to seek injunctive relief as a means of enforcing AB 5, and that IT Corp. gives the government the benefit of a presumption when it champions the public interest in an enforcement action invoking that authority. Uber and Lyft disagree, contending that the trial court effectively made the IT Corp. presumption irrebuttable. They are incorrect. At the last step of the IT Corp. analytical framework, the court treated neither side‘s showing as conclusive, leaving it free to strike the appropriate balance in its considered discretion.
What defendants overlook is that, in the final analysis under IT Corp., “if it appears fairly clear that the plaintiff will prevail on the merits“—as it does in this case—”a trial court might legitimately decide that an injunction should issue even though the plaintiff is unable to prevail in a balancing of the probable harms.” (IT Corp., supra, 35 Cal.3d at pp. 72–73, italics added.) We do not underestimate the difficulty of the trial court‘s task at this stage of the IT Corp. analysis, but so long as it properly understood its discretion as a legal matter, as we believe it did, we must defer to its exercise of discretion so long as the choice it made was within the permissible range of options before
Taking a slightly different tack focused on what they claim is the meager evidentiary showing of actual irreparable harm made by the People, defendants charge that the trial court improperly relied on general statements in Dynamex and AB 5, rather than evidence, in reaching its result. (See Herb Reed Enterprises v. Florida Entment. Mgmt. (9th Cir. 2013) 736 F.3d 1239, 1250 [trial court relied on “platitudes rather than evidence” in enjoining trademark infringement]; see also People v. Pacific Land Research Co. (1977) 20 Cal.3d 10, 21 [party seeking injunction must make showing by admissible evidence].) They contend the Legislature has not made—and could not properly make—findings applicable to this particular case (see Communist Party v. Peek (1942) 20 Cal.2d 536, 548 [“it is not the function of the Legislature to determine whether a statute declaring a general policy has been violated in a particular case“]; accord, Mack v. State Board of Education (1964) 224 Cal.App.2d 370, 374–375), and they argue that the policy rationale behind AB 5 is insufficient to show that anyone in this case is suffering injury.
We are unpersuaded by this line of argument. The trial court‘s application of the balancing test at the final step of its IT Corp. analysis was grounded firmly in record evidence. It is true that the People cited various
Defendants portray the record as if it were wholly one-sided; as if they, and they alone, came forward with evidence going to the issue of irreparable harm; and as if the trial court had no defensible choice but to deny interim relief in the face of their showing. We do not read the record that way. The People were not required to counter the array of impressively credentialed experts marshalled by defendants with experts of their own. They submitted 10 declarations from individuals who drive for Uber or Lyft attesting to the hardships they are currently suffering. The trial court was entitled to credit these declarations and draw reasonable inferences from them in light of defendants’ own evidence of how all drivers sign standard form contracts and all drivers are treated in standardized ways, much as a court would do in a
Defendants invited the court to draw a different set of inferences, to look at them as mere purveyors of the software on which their platforms operate, and to rely on their 32 driver declarations as more accurately describing the interests and preferences of most drivers than the People‘s 10 driver declarations. Defendants, on the strength of their driver declarations, insist that most Uber and Lyft drivers do not wish to be employees and are not interested in employment benefits. But the differences in the various driver perspectives offered on this issue have limited bearing here. The governing ABC test is not decided by plebiscite. And if there is a segment of drivers—even a large one—who do not need, wish to have, or even understand they are entitled to employment benefits, that does not strip others of rights the People seek to ensure may be claimed by all. What matters for substantial evidence purposes, at this stage, on appeal, is that there is competent evidence in the record supporting the People‘s showing of irreparable harm. (City and County of San Francisco v. Evankovich, supra, 69 Cal.App.3d at p. 54 [principal declaration submitted by union defendants in opposition to preliminary injunction, controverting facts in plaintiff city‘s verified amended complaint, did not require reversal of injunction since, “viewing the facts most favorably to the court‘s disposition . . . , the court did not abuse its discretion, despite the apparent conflict“].)
Arguing that the record is bereft of any actual evidence of irreparable harm, despite the driver declarations the People submitted, Uber relies on Sampson v. Murray (1974) 415 U.S. 61, for the proposition that “temporary loss of income, ultimately to be recovered, does not usually constitute irreparable injury.” (Id. at p. 90.) That case involved a terminated civil service probationary employee who claimed wrongful discharge and was granted reinstatement by preliminary injunction during the pendency of her lawsuit. (Id. at pp. 62–63.) The High Court reversed on the ground the plaintiff‘s wage loss and difficulties finding new employment under the cloud of a termination did not constitute irreparable harm. (Id. at pp. 88–89.) We see the circumstances here quite differently, starting with the fact that this is a government enforcement action, not an individual employment case. In Sampson, not only was the plaintiff‘s loss measurable in money, but backpay was “the usual, if not the exclusive” form of available relief for the statutory violation alleged there. (Id. at p. 91.) In a case brought by a private plaintiff seeking individual relief for loss of employment benefits, the general principle that money damages will supply a legally adequate remedy may often carry the day, as it did in Sampson, but here too we must bear in mind that this is an enforcement action by government plaintiffs invoking the public interest to forestall the need for a multiplicity of individual actions, under a statutory scheme that specifically authorizes them to seek injunctive relief.
Similarly contending that lost employment income is not irreparable harm, Lyft offers a version of this argument that is somewhat more blunt than the one Uber advances. “Injunctions do not issue to order the payment of money,” Lyft contends. (Friedman v. Friedman (1993) 20 Cal.App.4th 876, 890 [“monetary loss does not constitute irreparable harm” unless the amounts are unrecoverable].) According to Lyft, “[c]ase after case has
Unlike situations in which records are maintained and from which damages can be calculated, there is no comparable way to measure the failure to pay minimum wages accurately, much less overtime wages, or to provide meal and rest breaks, when no records exist for the time that drivers are not transporting passengers. By the same token, how can the failure to provide wage statements, sick leave and health benefits, unemployment insurance and training fund contributions, disability insurance, and workers’ compensation benefits, much less the impact on competitors impacted by defendants’ failure to comply with the law, be measured? They cannot be, and that is why interim injunctive relief at the request of the government was appropriate in this case. When violation of statutory workplace protections takes place on a massive scale, as alleged in this case, it causes
In sum, our assessment is as follows. The trial court found that rectifying the various forms of irreparable harm shown by the People more strongly serves the public interest than protecting Uber, Lyft, their shareholders, and all of those who have come to rely on the advantages of online ride-sharing delivered by a business model that does not provide employment benefits to drivers. Under IT Corp. the court determined that the balance of interim harms tips in favor of the People under the sliding scale analysis that must inform any equitable decision of the kind presented here. In striking that balance, the court relied on more than abstract expressions of policy, untethered to the facts before it. And it properly considered the harm shown by the record, in light both of those policies and of its determination that the People showed a reasonable probability—indeed, an “overwhelming likelihood“—of prevailing at trial. Accordingly, we conclude that the trial court correctly applied the law and that the choice it made to grant preliminary injunctive relief was “within the permissible range
D. The Injunction Is Not Vague or Overbroad
In fashioning a remedy, a court should “strive for the least disruptive remedy adequate to its legitimate task” and tailor it to the harm at issue. (Butt, supra, 4 Cal.4th at pp. 695–696.) And an injunction against legitimate business activities “should go no further than is absolutely necessary to protect the lawful rights of the parties seeking such injunction.” (People v. Mason (1981) 124 Cal.App.3d 348, 354.)
Defendants contend the injunction in this case violates these principles. According to Lyft, the injunction was improper without a showing that all of its drivers are suffering irreparable harm. Lyft relies upon O‘Connell v. Superior Court (2006) 141 Cal.App.4th 1452 (O‘Connell), where this division found overbroad an injunction, based on an equal protection claim, restraining the California Board of Education from denying diplomas to high school students who had not passed both portions of an exit exam, because the injunction “affected every high school in the state regardless of circumstances” and regardless of how many students were “actually educationally disadvantaged.” (Id. at pp. 1479–1480.) Lyft also points to Stormans, Inc. v. Selecky (9th Cir. 2009) 586 F.3d 1109 (Stormans), in which a trial court issued an injunction restraining enforcement of regulations requiring pharmacists to dispense Plan B emergency contraceptives without limiting the injunction to the plaintiffs before the court, who asserted religious objections. (Id. at p. 1118.) Without such limitation, the Court of Appeals concluded, the injunction was “fatally overbroad because it is not limited to the only type of refusal that may be protected by the First Amendment—one based on religious belief.” (Id. at p. 1141.)
By proposing a form of injunction fitted to the scale of the ongoing violations of law shown by the evidence—a proposal evidently put forward on the assumption the trial court would draw inferences from the record favoring them as movant—the People carried their initial burden of requesting appropriately tailored relief. But it is important to bear in mind that the court did not simply rubber-stamp the relief the People sought. To address the issue of potential overbreadth, the court issued an order prior to the August 6, 2020 hearing on the preliminary injunction, putting the following question to the parties: “How could an injunction, if granted, be framed so as to minimize the claimed harm to Defendants’ businesses and participating drivers?” In response, defendants stood mute. They devoted all
Here, on appeal, defendants continue to say nothing specific about how an injunction pending trial might be framed to minimize interim harm to them or others. Even assuming defendants preserved their ability to advance overbreadth objections on appeal despite their default on the issue below, we
Uber puts a slightly different twist on this issue, arguing that the injunction goes further than permissible because it does not inform Uber what additional changes to its business practices would suffice to allow it to treat its drivers as independent contractors in a way consistent with AB 5, thus exposing it to a “contempt trap.” And, both Uber and Lyft contend, the second part of the injunction—restraining them from “violating any provisions of the Labor Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare Commission with regard to their Drivers“—is an impermissible “obey the law” injunction that likewise exposes them unfairly to contempt because it gives no guidance on how to comply. In support of this argument, Uber cites several federal authorities. (U.S. v. Dixon (1993) 509 U.S. 688, 695 (Dixon); National Labor Relations Board v. Express Pub. Co. (1941) 312 U.S. 426, 435 (N.L.R.B.); Del Webb Communities, Inc. v. Partington (9th Cir. 2011) 652 F.3d 1145, 1150; Hughey v. JMS Development Corp. (11th Cir. 1996) 78 F.3d 1523, 1531–1532.)
Those cases are readily distinguishable. In Dixon, supra, 509 U.S. 688, the High Court merely noted a general rule at common law that injunctions “would not issue to forbid infringement of criminal or civil laws, in the absence of some separate injury to private interest” (id. at p. 695) as background to its analysis of a novel Double Jeopardy challenge to criminal prosecutions based on conduct that had previously led to criminal contempt proceedings. In N.L.R.B., supra, 312 U.S. 426, the Court held that the NLRB exceeded its authority because, after finding that a company had violated its duty under the National Labor Relations Act (the Act) to bargain in good faith with a union, the Board ordered the company “not to violate ‘in any manner’ the duties imposed on the employer by the statute.” (Id. at p. 432.) The high court rejected the Board‘s contention that, because the employer had violated one provision of the Act, the Board was “not only free to restrain violations like those . . . committed, but any other unfair labor practices of any kind which likewise infringe any of the rights enumerated in [the Act], however unrelated those practices may be to the acts of respondent which alone emerged in course of the hearing.” (Id. at pp. 432–433.) Here, by obvious contrast, the injunction includes no restraints on the commission of unlawful acts “dissociated from those which a defendant has committed.” (Id. at p. 436.) The federal Court of Appeals decisions Uber cites, meanwhile, involved injunctive orders—or overbroad portions of such orders—that left the enjoined parties so wholly in the dark as to what was prohibited that the challenged orders violated
In any event, we have the benefit of California case law on this point—case law that provides more specific guidance than the federal precedent on which Uber relies. At bottom, the governing test rests on the due process principle of fair notice. We ask whether the directive at issue is set forth ” ‘in terms so vague that men of common intelligence must necessarily guess at its meaning and differ as to its application.’ ” (In re Berry (1968) 68 Cal.2d 137, 156.) And we do not pursue the inquiry in the abstract. To be considered unconstitutionally vague, an injunction must suffer from vagueness in all its applications (Gallo, supra, 14 Cal.4th at p. 1116), since “[a] contextual application of otherwise unqualified legal language may supply the clue to a law‘s meaning, giving facially standardless language a constitutionally sufficient concreteness.” (Ibid.)
Taken in context, the conduct sought to be restrained—continued misclassification of drivers—is specifically identified on the record presented here. We do not demand the detail of an engineer‘s instruction manual, only that the injunction provide ” ‘reasonable specificity.’ ” (Gallo, supra, 14 Cal.4th at p. 1117.) This injunction passes that test. It is specific to the Labor Code provisions, Unemployment Insurance Code provisions, and Wage Orders with which these defendants must comply, and it is directed to the drivers who are the subject of this action. If, in altering its policies, Uber is unsure what it will take either to convert its drivers to employment, or to modify its business sufficiently to make its drivers genuinely “independent” and properly susceptible to classification as independent contractors, it can always petition the court for modification of the injunction. (
As for overbreadth, City of Redlands v. County of San Bernardino (2002) 96 Cal.App.4th 398, is the most instructive case. At issue there was an injunction issued in a writ proceeding under the California Environmental Quality Act (
Defendants insist it does, describing the injunction here as “radical” and “unprecedented.” But these adjectives perhaps say more about the reach of modern technology and the scale of today‘s technology-driven commerce than they do about the order itself. Although the business context may be relatively new, we conclude that the injunction was properly issued in accordance with enduring principles of equity. It is broad in scope, no doubt, but so too is the scale of the alleged violations.
The August 10, 2020 order is affirmed. The stay issued on August 20, 2020, shall expire 30 days after issuance of the remittitur in this appeal.
STREETER, J.
WE CONCUR:
POLLAK, P. J.
BROWN, J.
Trial Judge: Hon. Ethan P. Schulman
Counsel: Keker, Van Nest & Peters, Christa M. Anderson, Rachael E. Meny, R. James Slaughter; Munger, Tolles & Olson, Rohit K. Singla, Miriam Kim, Justin P. Raphael, Jeffrey Y. Wu for Defendant and Appellant Lyft, Inc.
Gibson, Dunn & Crutcher, Theodore J. Boutrous, Jr., Theane Evangelis, Blaine H. Evanson, Heather L. Richardson for Defendant and Appellant Uber Technologies, Inc.
Crowell & Moring, A. Marisa Chun, Kayvan Ghaffari, Alice Hall-Partyka for Bay Area Council, Earth Sparks, Internet Association, Silicon Valley Leadership Group, and Technet as Amici Curiae on behalf of Defendants and Appellants Lyft, Inc. and Uber Technologies, Inc.
Horvitz & Levy, Jeremy B. Rosen, Felix Shafir, Steven S. Fleischman for Chamber of Commerce of the United States of America, California Chamber of Commerce, National Retail Federation, and HR Policy Association as Amici Curiae on behalf of Defendants and Appellants Lyft, Inc. and Uber Technologies, Inc.
Willenken, Amelia L. B. Sargent, Kenneth M. Trujillo-Jamison for California Asian Pacific Chamber of Commerce, California Hispanic Chambers of Commerce, California State National Action Network, CA-NAACP State Conference, Los Angeles Metropolitan Churches, Los Angeles Urban League, National Action Network Sacramento Chapter Inc., National Asian American Coalition, National Black Chamber of Commerce, National Diversity Coalition, National Hispanic Council on Aging, National Newspaper Publishers Association, and Southern Christian Leadership Conference of Southern California (“Communities-of-Color Organizations“) as Amici Curiae on behalf of Defendants and Appellants Lyft, Inc. and Uber Technologies, Inc.
Independent Women‘s Law Center, Jennifer C. Braceras; Littler Mendelson, Bruce J. Sarchet, Michael J. Lotito for Independent Women‘s Law Center as Amicus Curiae on behalf of Defendants and Appellants Lyft, Inc. and Uber Technologies, Inc.
Eimer Stahl, Robert Dunn, John D. Tripoli for Mothers Against Drunk Driving and the California State Sheriffs’ Association as Amici Curiae on behalf of Defendants and Appellants Lyft, Inc. and Uber Technologies, Inc.
Xavier Becerra, Attorney General, Michael L. Newman, Senior Assistant Attorney General, Satoshi Yanai, Supervising Deputy Attorney General, Minsu D. Longiaru, Marisa Hernández-Stern, Mana Barari, and R. Erandi Zamora-Graziano, Deputy Attorneys General; Michael N. Feuer, City Attorney (Los Angeles), Michael Bostrom, Managing Assistant City Attorney; Mara W. Elliott, City Attorney (San Diego), Mark Ankcorn, Chief Deputy City Attorney, Kevin B. King and Marni Von Wilpert, Deputy City Attorneys; Dennis J. Herrera, City Attorney (San Francisco), Ronald P. Flynn, Chief Deputy City Attorney, Yvonne R. Meré, Chief of Complex and Affirmative Litigation, Molly J. Alarcon, Sara J. Eisenberg, and Matthew D. Goldberg, Deputy City Attorneys, for Plaintiff and Respondent.
Partnership for Working Families, Reynaldo Fuentes; Law Office of Beth A. Ross and Beth A. Ross for Gig Workers Rising, Mobile Workers Alliance, Rideshare Drivers United, and We Drive Progress as Amici Curiae on behalf of Plaintiff and Respondent.
National Employment Law Project, Nayantara Mehta, Brian Chen; Legal Aid at Work, George Warner for National Employment Law Project, ACLU of Northern California, Asian Americans Advancing Justice–Asian Law Caucus, Bet Tzedek Legal Services, California Employment Lawyers’ Association, the Center for Workers’ Rights, Centro Legal de la Raza, Council on American-Islamic Relations–California Chapter, La Raza Centro Legal‘s Workers’ Rights Program, Legal Aid at Work, the Lawyers’ Committee for Civil Rights of the San Francisco Bay Area, the Women‘s Employment Rights Clinic of Golden Gate University School of Law, and Worksafe, Inc. as Amici Curiae on behalf of Plaintiff and Respondent.
Public Rights Project, Jill E. Habig, Jonathan B. Miller, Lijia Gong, Sophia Tonnu for Public Rights Project, A Better Balance, Center for Popular Democracy, ChangeLab Solutions, Equal Justice Society, Equal Rights Advocates, National Center for Law and Economic Justice, National Center for Lesbian Rights, National Partnership for Women and Families, National Women‘s Law Center, One Fair Wage, Open Markets Institute, People‘s Parity Project, Public Counsel, Towards Justice, and Women‘s Law Project as Amici Curiae on behalf of Plaintiff and Respondent.
Notes
“The petitions are granted and the preliminary injunction is stayed pending resolution of Lyft and Uber‘s appeals, subject to the condition that, by 5:00 p.m. on August 25, 2020, Lyft and Uber shall both file written consents to the expedited procedures specified herein. If Lyft and Uber do not both file such written consents, the stay shall expire at 5:00 p.m. on August 25, 2020. The procedures are as follows:
“1. Lyft‘s and Uber‘s appeals shall be consolidated . . . .
“2. Lyft and Uber shall proceed with an appendix in lieu of a clerk‘s transcript on appeal . . . .
“3. Briefing shall proceed on . . . [a specified expedited] schedule . . . . Absent unforeseen extraordinary circumstances, there shall be no extensions. Oral argument shall be scheduled for October 13, 2020.
“4. On or before September 4, 2020, each defendant shall submit a sworn statement from its chief executive officer confirming that it has developed implementation plans under which, if this court affirms the preliminary injunction and Proposition 22 on the November 2020 ballot fails to pass, the company will be prepared to comply with the preliminary injunction within no more than 30 days after issuance of the remittitur in the appeal.
“5. Should Lyft or Uber fail to comply with these procedures, the People may apply to this court to vacate this stay.
“Unless otherwise ordered, the stay will dissolve upon issuance of the remittitur in the appeal. (Cal. Rules of Court, rule 8.272.)”
Both defendants consented to the conditions, and their chief executive officers have submitted declarations as required by paragraph 4 of the order.
At oral argument, counsel for Lyft correctly pointed out that as a general matter, statements of individual legislators, including bill sponsors, may not be relied upon in using legislative history to construe the meaning of ambiguous statutes. (Quintano v. Mercury Casualty Co. (1995) 11 Cal.4th 1049, 1062.) That is equally true for the views of supporters or opponents from outside the Legislature. (See Kaufman & Broad Communities, Inc. v. Performance Plastering, Inc. (2005) 133 Cal.App.4th 26, 37–39 [authoring legislator‘s files, letters, press releases and other statements not communicated to the Legislature as a whole not properly cognizable in assessing legislative history].) Although we see no need to go beyond the plain text and structure of AB 5 in construing the statutory scheme, we do note that these statements by Assemblymember Gonzalez and others are consistent with the acknowledgment of Uber‘s counsel that the Legislature “targeted” ride-sharing companies, even if its aim was not a rifle-shot.