An American federal appeals court on Monday (June 10) ruled to reject Uber’s challenge against a California law that could potentially force the ride-sharing giant to classify its gig workers as employees, rather than the lower-cost independent contractors they are typically considered.
The decision was made by an 11-judge panel of the U.S. Ninth Circuit Court of Appeals based in San Francisco, California. They upheld a lower court ruling that found Uber failed to prove that California Assembly Bill 5 (AB 5) unjustly singled out app-based transport companies like itself on the issue of treatment of gig workers, while exempting employers in other industries.
AB 5, passed in 2019 and signed into law, aims to require companies such as Uber, Lyft, and Postmates that rely on apps for operations to allow their workers to be formal employees entitled to minimum wage, workplace protections, and other benefits.
Uber and its food delivery subsidiary, Postmates, immediately filed lawsuits challenging the law, alleging that AB 5 violated their rights to equal protection under state and federal constitutions. AB 5 mandates ride-sharing and delivery companies to classify their workers as employees rather than independent contractors and incorporates the so-called ABC test into law to determine which workers are entitled to benefits. While other gig companies are subject to different tests, Uber and Postmates argue that this is unfair.
In the lawsuit, Uber and Postmates sought an injunction against the law that took effect in early 2020. Last year, a three-judge panel of the Ninth Circuit Court of Appeals sided with Uber and ordered a rehearing of the case that had been dismissed by a federal judge previously.
However, the recent ruling by the 11-judge panel on Monday determined that there is a “rational basis” to treat Uber differently from other companies utilizing gig workers because the California legislature believed that AB 5 was attempting to address the misclassification of workers, with ride-sharing and delivery service companies being the primary culprits.
Uber stated in a Monday release that the decision would not alter its relationship status with drivers as Proposition 22, a 2020 ballot initiative in California, deems drivers as contractors.
The fate of Proposition 22 is under review in another case at California’s highest court. Last month, the court heard arguments from a union and four drivers who argued that the ballot initiative was unconstitutional.