Uber loses its California appeal to label employees as independent contractors

A U.S. appeals court struck down a bid by Uber and its subsidiary, Postmates, on Monday that tried to reignite a challenge to a California law that could force certain companies to treat gig workers as employees rather than independent contractors.

The 9th Circuit Court of Appeals upheld the lower court ruling, saying that the plaintiffs have failed to show that the law, known as AB 5, unfairly singled out app-based transportation companies.

“There are plausible reasons for treating transportation and delivery-referral companies differently from other types of referral companies, particularly where the legislature perceived transportation and delivery companies as the most significant perpetrators of the problem it sought to address—worker misclassification,” Circuit Judge Jacqueline Nguyen wrote in the opinion.

A spokesperson for Uber didn’t immediately respond to Fast Company‘s request for comment.

The difference between being classified as a gig worker and an employee is crucial and hotly contested in the industry. Employees are entitled to minimum wage, overtime pay, reimbursements for expenses, and certain other protections that aren’t extended to independent contractors. That means hiring independent contractors, rather than employees, can be better for gig companies’ bottom lines. Several studies have found that contractors can cost companies up to 30% less.

AB 5, which went into effect in 2020, makes it more difficult for companies to classify their workers as independent contractors.

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