Ninth Circuit’s Recalibration Of Equal Protection Favors Businesses

On March 17, 2023, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit decided Olson v. California.¹ Judge Johnnie B. Rawlinson, joined by Judges Danielle J. Forrest and Morrison C. England, Jr., held that because California lawmakers were overtly hostile towards certain gig economy companies and workers when they enacted various pieces of legislation burdening some but not other companies (and workers), Uber, Postmates, and related plaintiffs have plausibly pleaded an equal-protection claim under the Fourteenth Amendment to the U.S. Constitution.

The California State Legislature started down this road with A.B. 5,² which was a response to the California Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles.³ That case had concerned a dispute as to whether workers were employees — in which case they might receive benefits such as “minimum wage, workers’ compensation if they are injured on the job, unemployment insurance, paid sick leave, and paid family leave”⁴ — or independent contractors — less so. And it pertained to wage orders. Under Dynamex, workers presumably are employees unless the hiring entity shows:

A.B. 5, followed by two other California statutes, codified Dynamex and then extended it. Under these laws, the protections of California’s Labor and Unemployment Insurance Codes also were to apply to the workers who counted as employees. Furthermore, California riddled its own workers-as-employees policy with exemptions galore, freeing many businesses and workers — such as lawyers; doctors; the insurance industry; architects; engineers; private investigators and accountants; freelance writers, editors, or cartoonists; manicurists, barbers or cosmetologists; real estate licensees; certain newspaper distributors; managers of recording artists; recording artists; and songwriters and lyricists — but not certain gig-economy companies (or those working there).⁶

This was no accident. As the Ninth Circuit observed, A.B. 5 “was largely driven by a perceived need to curb reported abuses in the gig economy, particularly rideshare companies and analogous platforms.”⁷ A.B. 5’s sponsor, Assemblywoman Lorena Gonzalez, published a Washington Post op-ed pointing out that that legislation would confer rights and benefits on gig workers that “companies such as Uber, Lyft, DoorDash, Handy and others” do not.⁸ In December 2019, the Los Angeles Times reported that Gonzalez was “open to changes in [A.B. 5] next year, including an exemption for musicians — but not for app-based ride-hailing and delivery giants.”⁹

That is not all. Half a year earlier, California Assemblyman Anthony Rendon had tweeted that “[t]he gig economy is nothing new. It’s a continuation of hundreds of years of corporations trying to screw over workers. With [A.B. 5], we’re in a position to do something about that.”¹⁰ A few months after Rendon’s tweet, Assemblywoman Buffy Wicks had gone on to tweet (about A.B. 5): “I believe all workers should benefit from the hard-fought protections won by unions — just because your employer uses a smartphone app, doesn’t mean they should be able to misclassify you as an independent contractor.”¹¹

Uber, Postmates, and other plaintiffs who wanted the flexibility of being classified as independent contractors sued California and its Attorney General in federal court. Eventually, a procedurally complex matter made its way to the Ninth Circuit.¹² Judge Rawlinson’s unanimous opinion for the Ninth Circuit panel acknowledged that economic classifications ordinarily are entitled to rational-basis review, which is a deferential form of judicial scrutiny. After all, as the Supreme Court has observed, “[o]n rational-basis review, [economic] classification[s]” made by statutes “come[] to [courts] bearing a strong presumption of validity.”¹³ Those challenging the rationality of this kind of a classification bear the onus of “negati[ng] every conceivable basis which might support it.”¹⁴ Not an easy burden to satisfy.

In practical terms, this means that the government need not have developed a legislative or administrative record to buttress its policy arguments. Should there be any “conceivable basis” for the measure in question, the courts will uphold it.¹⁵ In keeping with this principle, more than three decades ago, the Supreme Court asserted that the equal-protection principle “does not [even] demand for purposes of rational-basis review that a legislature or governing decisionmaker actually articulate at any time the purpose or rationale supporting its classification.”¹⁶ Indeed, under this view, “because [courts] never require a legislature to articulate its reasons for enacting a statute, it is entirely irrelevant for constitutional purposes whether the conceived reason for the challenged distinction actually motivated the legislature.”¹⁷ All this is believed to help “preserve” the government’s “ability to function” without excessive judicial second-guessing.¹⁸

There is no denying that “[d]efining the class of persons subject to a regulatory requirement — much like classifying governmental beneficiaries — inevitably requires that some persons who have an almost equally strong claim to favored treatment be placed on different sides of the line.”¹⁹ To that concern, the Supreme Court has said that this line-drawing exercise is one reserved “for legislative, rather than judicial, consideration.”²⁰

The Ninth Circuit’s opinion relied on the “disfavor” with which California lawmakers viewed the gig economy companies in question.²¹ This was supported, in the panel’s view, by the mismatch between A.B. 5’s stated purpose of giving workers certain protections and the wide swathe and scale of exemptions, granted on a “piecemeal” basis, the California laws also provided.²² This gerrymander, said the panel, was the result of “lobbying” and “backroom deal[s]” — not studied objectivity.²³ The panel took pains to point out that California law “also exempts those who work with certain app-based gig companies that perform errand services, such as Task Rabbit and Wag!, which have business models that are nearly identical to Uber and Postmates.”²⁴

These distinctions, as far as the panel was concerned, boiled down to a two-level problem: Why was California conceiving of gig companies and workers differently from other companies and workers in many other sectors? Why was California treating some gig companies and workers differently from other gig companies and workers? The panel answered: these distinctions have nothing to do with legitimate governmental interests and everything to do with bare animus.²⁵ The panel distinguished a recent, binding Ninth Circuit precedent²⁶ from this case by pointing to Gonzalez’s remarks “repeatedly disparaging” Uber and Postmates.²⁷

It is fitting to point out the prevailing case-law, if only to bring into stark relief the narrow sliver of space that was available to the Ninth Circuit to recognize a plausible equal-protection claim here — something it assuredly did. Starting with the New Deal cases, the Supreme Court has maintained that governmental regulations that do not discriminate against “discrete and insular minorities” presumably will survive judicial inspection.²⁸ Social and economic classifications would not have to undergo judicial micromanagement. The court did not see it fit to intervene to thwart the regular democratic process in the guise of deciding whether each and every single workaday law satisfied judges’ notions of good policy — they would be upheld if the legislature could have had a rational basis for assuming those laws would serve some legitimate governmental interests.²⁹

Therefore, throughout the second half of the 20th century and thus far in the 21st, the Supreme Court mostly has stated that governmental concerns “‘may justify, if they do not require, rough accommodations — illogical, it may be, and unscientific.'”³⁰ This is because the courts largely will not intrude “where the legislature must necessarily engage in a process of line-drawing.”³¹ Such “legislative choice[s],” the court generally has maintained, are “not subject to courtroom fact-finding and may be based on rational speculation unsupported by evidence or empirical data.”³²

What is more, “[a] classification does not fail rational basis review because it is not made with mathematical nicety or because, in practice, it results in some inequality.”³³ And when devising a benefits or obligations that unevenly affects various entities, the governmental measure need not be perfect or even accurate in order to be upheld, so long as it is reasonable. “[C]ourts are compelled under rational basis review,” as we have seen, “to accept a legislature’s generalizations even when there is an imperfect fit between means and ends.”³⁴

In this case, the Ninth Circuit panel had to navigate between Scylla and Charybdis because the Supreme Court and prior Ninth Circuit decisions had sent somewhat discordant signals on this subject. On the one hand, it is true — as noted earlier — that rational-basis review, which is highly deferential to the governmental entity in question, lets governments devise classifications and lines pretty much however they choose.

Yet, that deference is not the same thing as absolute governmental freedom or abdication of the judicial role. To that end, courts have also said that the factors motivating that manner of classifying or line-drawing may not be produced by “corruption, pure spite, or naked favoritism.”³⁵ But political inertia, economic burden-shifting, administrative conveniences, and other objective factors would escape judicial skepticism. In the Ninth Circuit panel opinion’s words, “animus” as a motivating factor would be impermissible, whereas “reason[able]” considerations would lie on the permissible side of the ledger.³⁶ That is why the Supreme Court, for much of its history, has strengthened the “class of one” theory of discrimination under equal-protection principles, meaning that irrational, arbitrary, animus-driven governmental discrimination may not be inflicted on any individual by the government.³⁷

This is not to say that the Ninth Circuit’s invocation of legislative motive is noncontroversial.

As the Supreme Court noted in the last term, it “has long disfavored arguments based on alleged legislative motives.”³⁸ It is “hazardous,” the court has long noted, for judges to examine “legislative motives.”³⁹ “Even when an argument about legislative motive is backed by statements made by legislators who voted for a law, [the Supreme Court has] been reluctant to attribute those motives to the legislative body as a whole.”⁴⁰ This is because “[w]hat motivates one legislator to make a speech about a statute is not necessarily what motivates scores of others to enact it.”⁴¹ Some might argue that the Supreme Court’s recent legislative-motive pronouncement sits awkwardly with the Ninth Circuit’s invocation of certain California legislators’ expressed views on Uber, Postmates, and the like.

That is not all. The Ninth Circuit’s panel opinion appears to suggest that the gradually-conferred, “piecemeal” exemptions — exemptions not extended to the Olson challengers — “strengthened” “[t]he plausibility of Plaintiffs’ allegations.”⁴² The Ninth Circuit continued to say that this bit-by-bit “fashion” of exempting certain sectors of the economy “lends credence to Plaintiffs’ allegations that the exemptions were the result of ‘lobbying’ and ‘backroom dealing’ as opposed to adherence to the stated purpose of the legislation.”⁴³

Some might regard this inference to be in tension with an important pillar of rational-basis review. Prevailing wisdom tends to suggest that governments may not be faulted for failing to address a perceived social or economic ill in one fell swoop. That is because, under Supreme Court precedent, the government is entitled to significant “leeway to approach a perceived problem incrementally.”⁴⁴ Reforms chosen by the government, we are informed, “may take one step at a time, addressing itself to the phase of the problem which seems most acute to the legislative mind” at the moment of the enactment in question.⁴⁵ In other words, it is said that when enacting social or economic legislation, legislators are permitted to “select one phase of one field and apply a remedy there, neglecting the others.”⁴⁶ As with the aforestated argument about legislative motives, it is not impossible to distinguish Olson from the Supreme Court’s instructions but it would require significant exertions.

The Ninth Circuit’s three-judge panel opinion premised on equal-protection principles will probably not be the last word on this subject.⁴⁷ It is suffused with issues carrying significant implications well beyond the gig-economy context. Olson may well go en banc, meaning it may be reheard by a larger panel of the Ninth Circuit. In the end, whether it be through this case or another case raising similar issues, the Supreme Court may need to intervene to determine the future of the constitutionality of social or economic classifications. And if the Supreme Court does intervene, it will have an opportunity to elucidate the original public meaning of the Equal Protection Clause as it pertains to Olson-type classifications. That constitutional frontier may be where the U.S. is headed.