U.S. Appeals Court Rejects Uber and Postmates’ Challenge to California Worker Classification Law
In a blow to Uber and its subsidiary Postmates, a U.S. appeals court ruled on Monday against their attempt to revive a legal challenge to California’s AB 5 law, which could compel certain businesses to treat gig workers as employees rather than independent contractors.
The 9th Circuit Court of Appeals affirmed the decision of the lower court, stating that the plaintiffs failed to demonstrate that AB 5 unfairly targeted app-based transportation companies.
Circuit Judge Jacqueline Nguyen, in the court’s opinion, noted plausible reasons for differentiating transportation and delivery-referral firms from other referral companies, particularly given the legislature’s focus on addressing worker misclassification issues, which were perceived to be most prevalent in these sectors.
While Uber declined to comment immediately, the distinction between gig workers and employees remains a contentious issue in the industry. Employees are entitled to various benefits such as minimum wage, overtime pay, expense reimbursements, and other protections not afforded to independent contractors. This classification significantly impacts the financial dynamics of gig companies, with studies indicating potential cost savings of up to 30% by hiring independent contractors over employees.
AB 5, enacted in 2020, imposes stricter criteria for classifying workers as independent contractors, presenting challenges for companies seeking to maintain this classification.