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Archive for the ‘Employment Law Blog – CA’ Category

Uber and Lyft Drive Prop 22 Home in California

Posted on: November 17th, 2020

By: Adam Khan

On November 3, 2020, California voters resoundingly passed Proposition 22, delivering Uber and Lyft a big victory, and labor unions a setback. 

Prior to Prop 22, AB5 expanded the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court. Specifically, AB5 applied Dynamex’s “ABC test” to both California Wage Orders and the California Labor Code, creating a presumption that workers in California were employees, not independent contractors, unless an employer could satisfy the three-part ABC test. Under the ABC test, workers are presumed to be employees unless the employer can show: (A) the company does not control or direct what the worker does, either by contract or in actual practice; (B) the worker performs tasks outside of the hiring entity’s usual course of business; and (C) the worker is engaged in an independently established trade, occupation, or business.

Prop 22 exempts rideshare and delivery companies from Dynamex’s ABC test. However, the new law comes with certain requirements, including:

  • Earnings Guarantee: Rideshare and delivery companies must pay 120% of the local minimum wage, plus 30 cents per mile (adjusted for inflation) for “engaged” driving time (i.e., time spent actively driving, not waiting). 
  • Healthcare Subsidies: For drivers working 15-25 hours per week, employers must pay greater than or equal to 50% of the average employer contribution toward a Covered California Plan. For drivers working over 25 hours per week, employers must pay greater than or equal to 100% of the average employer contribution toward a Covered California Plan.
  • Loss and Liability Insurance: Companies must carry, provide, or make available occupational accident insurance to cover medical expenses (up to at least $1,000,000) and lost income (equal to 66% of the driver’s average weekly earnings) resulting from injuries suffered when the driver is on the company’s platform. 
  • AntiDiscrimination and Public Safety: Prop 22 prohibits workplace discrimination, and requires companies to (1) develop sexual harassment policies; (2) conduct criminal background checks; and (3) mandate safety training for drivers.

Prop 22 can only be amended if proposed changes are consistent with the new law’s purpose, and supported by seven-eighths of lawmakers favoring the amendment.

Prop 22’s passage will likely elicit other industries to campaign for independent contractor classification. Some industries have already done so. AB 2257, which passed last September, exempted musicians, fine artists, freelance writers, photographers, and translators from being classified as employees, deeming them instead independent contractors. California can expect other industries to similarly pursue independent contractor status to avoid high costs associated with hiring employees.

If you have questions or would like more information, please contact Adam Khan at [email protected].

Californians Will Soon Receive Their Supplemental $300 A Week Unemployment Benefits

Posted on: September 8th, 2020

By: Michelle Harrington

California has secured $4.5 billion from the Lost Wages Assistance Program (LWAP) that will result in a $300 per week boost in unemployment benefits to millions of unemployed people in California impacted by the Coronavirus pandemic. The funding was made possible through an executive order signed by President Donald Trump approximately a week after Congress’s Coronavirus relief measures expired in July, cutting off an extra $600 per week in unemployment payments for millions of Americans. Individuals who are currently eligible to receive at least $100 per week in unemployment benefits from the state may also now qualify for an additional $300 weekly supplement, paid for by the federal agency in charge of disaster relief, the Federal Emergency Management Agency (FEMA).

FEMA has been authorized to work with all states and pay up to $300 per week in extra unemployment benefits to eligible recipients on top of the unemployment benefits already being paid by the states. The extra $300 payments have been approved for only three weeks and are retroactive to the week beginning August 1, with the possibility for an extension if funds are available. 

It has been up to the states to apply through FEMA for the LWAP funding.  As of August 31, approximately three dozen states have applied and been approved. According to news reports and state unemployment websites, a handful of states including Arizona, Louisiana, and Missouri have already begun sending out the extra $300 payments to eligible residents. 

When Will Californians Receive the Supplemental $300?

California’s Employment Development Department (EDD) announced that it will start processing payments beginning the week of September 7. 

The first phase covers people who previously provided information that they were unemployed due to a COVID-19 related reason on their initial application and have already received their regular state or federal unemployment payments for benefit weeks between July 26 and August 15.

The second phase will cover people who did not have the opportunity to indicate they were unemployed due to a COVID-19 reason on their initial application and still meet the minimum $100 weekly benefit amount eligibility requirement.

The EDD has indicated it will send notifications to people in the second phase, asking them to complete a one-time self-certification if they are unemployed due to disruptions caused by COVID-19. Notifications will be sent by email, text message or mail starting in mid-September.

Who Is Eligible?

The EDD lists two specific requirements for individuals to receive the LWAP payments:

  1. currently eligible to receive at least $100 per week in benefits, and
  2. who have provided a self-certification that they are unemployed or partially unemployed due to disruptions caused by COVID-19.

What Do Californians Have To Do To Get the Supplemental $300?

Individuals who are eligible to receive the LWAP payments should automatically receive them from the EDD, much like the earlier $600 federal unemployment supplement. 

If you have questions or would like more information, please contact Michelle Harrington at [email protected]

9th Circuit Holds Amazon’s Last-Mile Delivery Drivers are Exempt from Arbitration

Posted on: August 21st, 2020

By: Josue Aparicio[1]

On Wednesday, the Ninth Circuit Court of Appeals held that Amazon’s delivery drivers are exempt from the Federal Arbitration Act (“FAA”) because they are transportation workers “engaged in interstate commerce.”

The decision is a huge loss for e-commerce giant, Amazon.com, who is facing several class action lawsuits arising from its “Amazon Flex” program; a delivery service platform in which Amazon contracts with a fleet of on-demand, gig economy workers to perform “last mile” deliveries of Amazon packages. Like many gig workers, Amazon’s so-called “flex drivers” are classified as independent contractors, perform deliveries using their personal vehicles, and follow assigned delivery routes provided by the Amazon Flex smartphone application.

In a 2-1 decision, a divided Ninth Circuit panel affirmed the lower court’s ruling that denied Amazon’s motion to compel arbitration of its flex drivers’ wage and hour class action.[2] Contrary to Amazon’s contentions, the court found the flex drivers did not have to physically cross state lines to be “engaged in interstate commerce” or to fall within the FAA’s so-called “transportation workers” exemption. In the court’s view, since Amazon is “one of the world’s largest online retailers” in the business of shipping goods worldwide, its delivery drivers are “engaged in interstate commerce” through their participation in delivering packages that travel through the “stream of interstate commerce.”

Rittmann v. Amazon.Com, Inc.

In 2016, flex drivers filed a nationwide class and collective action against Amazon.com, alleging the company misclassified them as independent contractors thereby denying them the benefits and protections of state and federal labor laws.

In response, Amazon moved to compel arbitration of the plaintiffs’ individual claims based on an arbitration provision within the terms of service of the Amazon Flex mobile app, which flex drivers must agree to before they can sign up for the Amazon Flex program. Importantly, the terms of service expressly state that the agreement is governed by the laws of the state of Washington, except for the arbitration provision which is governed exclusively by the Federal Arbitration Act (“FAA”).

In April 2019, Judge Coughenour of the U.S. Federal District Court for the Western District of Washington denied Amazon’s motion and concluded that flex drivers fall within the “transportation worker” exemption to the FAA because they deliver goods shipped from across the country.[3] Consequently, since the FAA did not apply and the parties expressly contracted that Washington law could not apply, the district court invalidated the arbitration agreement because it was unclear what law would apply or if the parties even intended to arbitrate disputes in the event the FAA did not apply. Amazon appealed the ruling to the Ninth Circuit.

The Ninth Circuit’s Interpretation of the Transportation Worker Exemption

While the FAA applies broadly to arbitration agreements and reflects a liberal policy favoring arbitration, Section 1 of the statute renders its enforcement provisions inapplicable to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”[4] The U.S. Supreme Court in its 2001 landmark decision, Circuit City Stores, Inc. v. Adams, construed the language in Section 1 narrowly to apply exclusively to “transportation workers.”[5] However, the Court never defined the term “transportation worker,” and since then, state and federal courts have struggled to determine which “class of workers” fall within the ambit of the exemption.

On appeal, Amazon challenged the district court’s ruling by asserting that its flex drivers are exclusively “engaged in local, intrastate activities” because they do not cross state lines when performing deliveries. According to Amazon, a worker must physically cross state lines in the course of making deliveries to be “engaged in foreign or interstate commerce” for the exemption to apply.

The Ninth Circuit majority disagreed and held that crossing state lines is not a necessary condition for the application of the transportation worker exemption. In the court’s view, an interstate transaction between Amazon and a customer does not conclude until the package reaches its intended destination. Accordingly, when an Amazon package travels interstate and is held locally in an Amazon warehouse, the interstate journey of the package does not “come to rest” until it is delivered to the intended recipient. Therefore, even though flex drivers only pick up packages from local Amazon warehouses and deliver them “purely intrastate” to a customer’s home, the driver is “engaged in interstate commerce” by performing the last leg or “last mile” of the interstate journey. Based on this reasoning, the Ninth Circuit held that flex drivers are exempt from the FAA under the transportation worker exemption.

In affirming the lower court’s ruling, the Ninth Circuit also agreed that since the FAA does not apply and the contract terms state Washington law cannot apply to the arbitration provision, there is no valid arbitration agreement between the parties.

However, in a 36-page dissenting opinion, Judge Daniel Bress criticized the majority opinion for creating further uncertainty around the interpretation of the “transportation worker” exemption, “as well as inequities among delivery workers who are similarly situated.” In his view, to be “engaged in interstate commerce” the delivery driver “must belong to a ‘class of workers’ that crosses state lines in the course of making deliveries,” otherwise what should be a narrow exemption “could broadly include anyone who delivers goods between any two locations.”

This ruling comes just a month after the First Circuit Court of Appeals also rejected Amazon’s motion to compel arbitration in a lawsuit involving a putative class of flex drivers from Massachusetts who similarly allege Amazon misclassified them as independent contractors.[6]

Employer Takeaways

Recent federal appellate court decisions have certainly expanded the “class of workers” exempt from the FAA. In addition to the Ninth and First Circuit’s inclusion of “last-mile” delivery drivers, the Third Circuit recently expanded the exemption to include workers who transport passengers, such as ride sharing companies, Uber and Lyft.[7]

On the other hand, the Ninth Circuit’s Rittmann decision made clear that individuals delivering food or meals for companies like DoorDash, GrubHub and Postmates are not “engaged in interstate commerce.” In the court’s view, there is an important distinction between making local deliveries of goods that have arrived at a local restaurant and whose continuous interstate journey is broken, as opposed to the packages delivered by Amazon’s flex drivers, which are often shipped from out of state and do not end their interstate journey until they reach the intended consumer.

If you have questions or would like more information, please contact Josue Aparicio at [email protected].


[1] Josue Aparicio is an Attorney with Freeman, Mathis & Gary LLP who specializes in worker misclassification claims under California law. (https://www.fmglaw.com/attorney_bio.php?id=408)

[2] Rittmann v. Amazon.com, Inc. (9th Cir. 2020), Case No. 19-35381.

[3] Rittmann v. Amazon.com, Inc. (W.D.Wash. 2019) 383 F. Supp. 3d 1196.

[4] 9 U.S.C. § 1 (emphasis added).

[5] Circuit City Stores, Inc. v. Adams (2001) 532 U.S. 105, 118-119.

[6] Waithaka v. Amazon.com, Inc. (1st Cir. 2020) 966 F.3d 10.

[7] Singh v. Uber Techs., Inc. (3d Cir. 2019) 939 F.3d 210, 219; Cunningham v. Lyft, Inc. (D.Mass. March 27, 2020) Case No. 1:19-cv-11974.

An Uber Disruption: California Judge Grants Preliminary Injunction Requiring Uber and Lyft to Stop Classifying Drivers as Independent Contractors

Posted on: August 14th, 2020

By: Josue Aparicio[1]

On Monday, a California Judge granted a preliminary injunction ordering that the popular ride-hailing companies, Uber and Lyft, stop classifying their drivers as independent contractors during the pendency of their litigation against the state of California.

Importantly, the ruling by Judge Ethan Schulman of the San Francisco Superior Court does not automatically convert California’s Uber and Lyft drivers into employees. Rather, it sets up what is expected to be a lengthy appeal process arising from California’s ongoing enforcement of its controversial new law, Assembly Bill No. 5. This decision, however, poses an existential threat to the so-called “gig economy” business model, which relies on a fleet of app-based, on demand, independent contractors who set their own hours, but are not entitled to many of the benefits and protections of California’s labor and employment laws.

The ruling is stayed until August 20th to allow for Uber and Lyft to appeal. On Thursday, Judge Schulman denied both companies’ request to extend the stay beyond August 20th, forcing Uber and Lyft to seek a stay from the appellate court.

California’s Controversial A.B. 5

In September 2019, the California Legislature passed, and Governor Gavin Newsom signed into law, Assembly Bill No. 5 (“A.B. 5”). A.B. 5, which took effect on January 1, 2020, codified the so-called “ABC test” adopted by the California Supreme Court in its 2018 landmark decision, Dynamex Operations West, Inc. v. Superior Court.[2] Under the ABC test, any person providing labor or services for compensation is presumed to be an employee, rather than an independent contractor, unless the “hiring entity” demonstrates that all three of the following conditions are satisfied:[3]

  1. The 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.
  2. The person performs work that is outside the usual course of the hiring entity’s business.
  3. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

In response, three tech companies—Uber, Lyft, and Doordash—filed Proposition 22,[4] a California ballot initiative on the November 2020 ballot that, if enacted, would classify certain app-based drivers as independent contractors and essentially override A.B. 5. Additionally, just two days before its enactment, Uber and Postmates, Inc. filed a lawsuit[5] in federal court against the State of California asserting that A.B. 5 unconstitutionally “targets” gig economy companies and treats them differently from similarly situated groups. In February 2020, a federal district court denied Uber and Postmates’ request for a preliminary injunction that would have prevented the state of California from enforcing A.B. 5 against the two tech companies. An appeal to this ruling is pending in the Ninth Circuit Court of Appeal.

The State of California v. Uber and Lyft

In May, California Attorney General Xavier Becerra joined forces with the City Attorneys of San Francisco, Los Angeles and San Diego to file a lawsuit against Uber and Lyft, asserting the two ride-hailing companies misclassified their drivers as independent contractors in violation of California’s A.B. 5. Then, in June, the State moved for a preliminary injunction enjoining Uber and Lyft from classifying their drivers as independent contractors.

In a 34-page decision, Judge Schulman granted the State’s preliminary injunction, and made three important determinations, which could have major ramifications on the gig economy. First, the court found that Uber and Lyft are indeed “hiring entities” within the meaning of A.B. 5. Second, the court found that Uber and Lyft are in the “transportation business,” as opposed to self-proclaimed “technology companies.” Finally, the court found that the potential adverse effects of reclassifying Uber and Lyft’s drivers, even given the COVID-19 pandemic, did not outweigh the “substantial public harm” that would result to drivers, competing businesses and the general public if the preliminary injunction were not granted.

Employer Takeaway

If upheld, this ruling could have serious implications on the “gig economy.” If these drivers are classified as “employees,” companies like Uber and Lyft would be required to substantially change their business practices and provide their drivers certain benefits employees are entitled to under California law, such as minimum wage, overtime pay, workers’ compensation, unemployment insurance, paid sick leave, and paid family leave.

Companies with a large workforce of independent contractors should be put on notice that this ruling is yet another example of what appears to be California’s increased efforts to enforce A.B. 5 and reclassify the state’s independent contractors as employees. In February, the San Diego City Attorney’s office obtained a similar preliminary injunction against the grocery-delivery platform, Instacart.[6] In June, San Francisco’s District Attorney’s office filed a lawsuit[7] against the takeout delivery platform, DoorDash, Inc., alleging the company is misclassifying its delivery drivers as independent contractors in violation of A.B. 5, and similarly seeks a preliminary injunction to stop the alleged misclassification. And just last week, the California Labor Commissioner’s Office filed a pair of lawsuits in Alameda County Superior Court, which allege Uber and Lyft committed systemic wage theft by misclassifying drivers as independent contractors.

If you have questions or would like more information, please contact Josue Aparicio at [email protected].


[1] Josue Aparicio is an Attorney with Freeman, Mathis & Gary who specializes in worker misclassification claims under California law. (https://www.fmglaw.com/attorney_bio.php?id=408)

[2] Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903.

[3] Lab. Code § 2750.3(a)(1)

[4] Proposition 22, the Protect App-Based Drivers and Services Act, would provide that app-based rideshare and delivery drivers are independent contractors and not employees or agents with respect to their relationship with a network company if certain conditions are met. (Qualified Statewide Ballot Measures, Cal. Secretary of State, https://www.sos.ca.gov/elections/ballot-measures/qualified-ballot-measures/).

[5] Olson v. California (C.D. Cal. Feb. 10, 2020) No. CV 19-10956-DMG, appeal filed, No. 20-55267 (March 11, 2020)

[6] The People of the State of California v. Mablebear, Inc., San Diego Superior Court, Case No. 37-2019-00048731

[7] The People of the State of California v. DoorDash, Inc., San Francisco Superior Court, Case No. CGC-20-584789 (filed June 16, 2020).

CARES in California: New Unemployment Benefits Available Under Federal Law

Posted on: May 8th, 2020

By: Anastasia Osbrink

With over 3.5 million unemployment claims in California since mid-March, the state is facing an historic level of payments that need to be made. In fact, the state has paid out approximately $4.5 billion, which is entirely unprecedented. Every state will be stretched thin, but at least for four months, unemployed Californians will see a significant increase in their unemployment payments thanks to the new federal Coronavirus Aid, Relief, and Economic Security Act, or the “CARES” Act. Section 2104 of the CARES Act provides that those who qualify for unemployment benefits in participating states, which now includes California, will receive their normal weekly benefit amount, plus an additional $600 per week. This additional $600 is a federal supplement, known as Pandemic Emergency Unemployment Compensation (“PEUC”). In California, the average weekly unemployment benefit is $340. As a result of the PEUC, the average unemployment benefit check in California will increase to $940. The maximum benefit in California of $450 per week will also increase to $1050. These payments will be made through the Employment Development Department’s (“EDD”) debit cards as usual.

These benefits are not retroactive, and in California, they began on Sunday, April 12, 2020. The usual one-week waiting period for benefits is eliminated under section 2105 of the CARES Act. The additional $600 is only available while the individual would normally be eligible for benefits in that state. In California, this means benefits are available for 26 weeks. However, the additional $600 will cease on July 31, 2020 pursuant to the CARES Act and after that, the employee will receive their normal unemployment payment for the remainder of the 26-week period. Once the 26-week period is over, individuals will receive their normal benefit amount (though not the additional $600 after July 31, 2020) for a 13-week period pursuant to section 2107 of the CARES Act. That benefit and the waiver of the one-week waiting period will expire on December 31, 2020.

These benefits are obviously welcome aid for unemployed Californians. However, there are many issues the State continues to face. First, the CARES Act provides benefits for the first time to contract and furloughed workers and those in the gig economy. This means a whole new category of claims to process. That, coupled with business closures and layoffs, has resulted in a huge increase in claims. The extent of delays for individuals seeking benefits remains to be seen. Many applicants are unable to reach the EDD by phone because the EDD’s phone lines are open just four hours per day. Now that millions are trying to access the EDD, many are calling on the State to expand those hours. However, those administrative costs are paid for by employers through a federal tax, and federal funding was significantly reduced over the past several years due to the boom economy. As a result, EDD staffing was cut in half in California. Thus, half the amount of EDD staff is now struggling to process millions of claims. Federal law requires 90% of claims to be processed within 21 days. California came close to that in February and has appeared to largely keep up with it in March and April thanks to a more streamlined temporary process that has been implemented. This includes waiving some verification requirements until after payments are issued, no longer requiring claimants to recertify their claims every two weeks, and processing more claims through an automated system. However, significant delays have been reported for employees who were misclassified as independent contractors by employers and did not have their wages reported to the EDD, which is doing a wage audit. Many of these claimants have reported waiting six weeks or more before receiving benefits.

Additionally, it appears likely that it will be a long time before life returns to normal (though it will certainly be a new “normal” and not the normal we used to know), and the economy will take even longer to recover. This means months, and likely years of high unemployment in the State. How that unemployment will be paid for in the long run will be a significant challenge. In an effort to address this challenge, California became the first state in the country to take out a federal loan. As of April 30th, California has borrowed $348 million from the federal government and has been approved to borrow up to $10 billion. This is not the first time the state has taken out such a loan. California borrowed $10.7 billion from the federal government during the Great Recession that it just finished paying back in 2018, including hundreds of millions of dollars in interest. As of now, this appears to be California’s best option to stay afloat during what has become the highest period of unemployment since the Great Depression. Regardless, we can appreciate the reprieve and aid offered by the CARES Act.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include real estate issues, business interruption losses, and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

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