On October 15, 2024, the U.S. Supreme Court declined to hear a challenge from Uber Technologies and its subsidiary Postmates regarding California's Assembly Bill 5 (AB5). This law mandates that companies treat drivers as employees rather than independent contractors. The Court's decision follows a ruling from the 9th U.S. Circuit Court of Appeals, which found that Uber failed to demonstrate that AB5 unfairly targeted app-based transportation services while exempting other industries.
Currently, drivers for app-based services are exempt from AB5 due to Proposition 22, an industry-backed initiative approved by California voters in 2020. The California Supreme Court upheld Proposition 22 in July, rejecting claims from unions that it violated state constitutional provisions.
Theane Evangelis, representing Uber, argued that AB5 was improperly aimed at app-based services. She emphasized that Proposition 22 allows drivers to maintain their independence while also providing them with significant benefits, amounting to over $1 billion thus far.
AB5 raises the threshold for classifying workers as independent contractors, requiring proof that they operate independently of the company's control. This law has faced challenges, including a federal rule from the U.S. Department of Labor that complicates independent contractor classifications under federal law.
Uber and Postmates, alongside two drivers, initially filed suit against AB5 in 2019, claiming it unconstitutionally targeted their industry. A federal judge dismissed the case early on, but a subsequent ruling revived it before the 9th Circuit ultimately ruled against the companies.