A U.S. appeals court on Monday rejected a bid by Uber (NYSE:UBER) and its subsidiary Postmates to revive a challenge to a California law that could force the companies to treat drivers as employees rather than independent contractors.
What Happened: The 11-judge panel of the 9th U.S. Circuit Court of Appeals in San Francisco upheld a lower court’s decision, Reuters reported on Tuesday. The court ruled that Uber did not demonstrate that the 2020 state law, AB5, unfairly targeted app-based transportation companies while exempting other industries.
Uber stated on Monday that the ruling would not alter the status of its drivers, who remain contractors under Proposition 22, a 2020 ballot initiative. The fate of Prop 22 is currently being considered in a separate case by California’s top court.
Judge Jacqueline Nguyen of the 9th Circuit wrote, "There are plausible reasons for treating transportation and delivery referral companies differently from other types of referral companies."
The California legislature viewed these companies as significant perpetrators of worker misclassification.
Employees are entitled to minimum wage, overtime pay, and other protections not extended to independent contractors. Uber and similar services typically classify workers as contractors to manage costs. The debate over AB5 is part of a broader national discussion on worker classification laws.
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Why It Matters: The ruling against Uber comes amid a broader national debate on gig economy regulations. In January, the Biden administration issued a rule aimed at regulating the gig economy and independent contractors. The rule seeks to establish a fair playing field for businesses while safeguarding workers' rights to fair pay and benefits. Acting labor secretary Julie Su emphasized the rule’s goal to “create a level playing field for businesses, protect workers from being denied the right to fair pay and affirm the vital role true independent contractors play in our economy by allowing them to thrive.”
In Minnesota, Uber and Lyft drivers are set to receive higher pay starting Jan. 1, 2025, thanks to a new law resulting from negotiations between the state and these ride-hailing giants.
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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
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