U.S. Appeals Court Rejects Uber and Postmates Challenge to California Law

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A U.S. appeals court on Monday dealt a blow to Uber and its subsidiary Postmates, dismissing their attempt to revive a legal challenge against a California law that could potentially reclassify drivers as employees rather than independent contractors.

The 11-judge panel of the 9th U.S. Circuit Court of Appeals in San Francisco upheld a previous ruling that Uber failed to demonstrate that the 2020 state law, known as AB5, unfairly targeted app-based transportation companies while exempting other industries.

Uber responded to the ruling, stating that it would not alter the status of its drivers, who are currently classified as contractors under Proposition 22, a ballot initiative passed in 2020. However, the fate of Prop 22 is under scrutiny in a separate case before the state’s highest court, where arguments have been presented questioning its constitutionality.

In its decision, the 9th Circuit acknowledged plausible reasons for treating transportation and delivery companies differently, given concerns over worker misclassification. This classification distinction is significant, as employees are entitled to various protections and benefits, including minimum wage, overtime pay, and expense reimbursements, which are not provided to independent contractors.

The clash over the interpretation of AB5 occurs amidst a broader national discourse on labor laws and regulations, with implications for worker classification and company operations. Business groups have challenged efforts by the Biden administration to tighten regulations on worker classification, while similar debates are ongoing in other states like Massachusetts.

Uber and Postmates initially sued over AB5 in 2019, arguing that the law unfairly targeted workers and companies in the on-demand economy. While their lawsuit was dismissed at an earlier stage, a three-judge panel of the 9th Circuit reinstated the case last year. However, Monday’s ruling by the 11-judge panel overturned this decision, marking a setback for Uber’s legal challenge against AB5.

The outcome of this legal battle has significant implications not only for Uber and Postmates but also for the broader gig economy and the future of worker classification in California. As the legal landscape continues to evolve, stakeholders are closely watching developments that could reshape labor practices and regulations in the state and beyond.