The U.S. Supreme Court has declined to hear Uber Technologies’ attempt to challenge California’s controversial AB5 law, which could have forced the company to classify its drivers as employees rather than independent contractors. The court’s refusal to review the case lets a prior decision from the 9th U.S. Circuit Court of Appeals stand, marking a significant setback for Uber and its subsidiary Postmates.
At the core of the dispute is California’s 2020 law, AB5, which tightened the requirements for companies to classify workers as independent contractors. Uber and Postmates argued that the law unfairly targeted app-based transportation services while exempting other industries, a claim rejected by the appellate court. Despite this loss, app-based drivers remain exempt from AB5 due to Proposition 22, a 2020 ballot initiative supported by Uber and other industry giants. In July, the California Supreme Court upheld Prop 22, affirming its legality.
Uber’s attorney, Theane Evangelis, expressed disappointment with the ruling but emphasized that Prop 22 remains the law in California. “Prop 22 ensures that drivers retain the flexibility they want while receiving benefits, with over $1 billion distributed so far,” Evangelis stated.
California Attorney General Rob Bonta has yet to comment on the decision. Under AB5, companies must demonstrate that their workers operate independently, beyond the direct control of the company, to qualify as contractors. Employees, on the other hand, are entitled to protections such as minimum wage, overtime, and expense reimbursements, benefits not generally extended to independent contractors.
This case comes amidst broader national debates over gig economy workers’ classification. In January, the U.S. Department of Labor introduced new rules making it harder for companies to classify workers as contractors under federal wage laws. A coalition of business groups has challenged the rule in Texas federal court.
Uber and Postmates originally filed the lawsuit against AB5 in 2019, claiming that it was unconstitutional. While a federal judge initially dismissed the case, a three-judge panel revived it last year, citing the selective exemptions in the law. However, the full 9th Circuit ultimately ruled against Uber, upholding California’s position that the law was a reasonable response to the potential misclassification of gig workers.
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