A U.S. appeals court on Friday revived a lawsuit by Uber challenging a California law that made it more difficult for the rideshare company to classify workers as independent contractors.
In a major win for the gig economy, which heavily relies on contractors, the 9th Circuit Court of Appeals said the state must face claims that Assembly Bill 5 is unconstitutional, improperly singling out the rideshare industry while exempting many others.
It is the second court decision this week that supports companies’ ability to offer flexible contract work in lieu of full-time employment. A state appeals on Monday upheld Proposition 22 passed by voters in 2022 to specifically give app-based companies like Uber the ability to hire workers as contractors.
Uber hailed the 9th Circuit decision in a statement, saying “this is yet another signal that efforts to take away drivers’ independence and flexibility will ultimately fail.”
The office of California Attorney General Rob Bonta said in a statement that it was reviewing the decision and assessing its next steps.
“We will continue to defend laws that are designed to protect workers and ensure fair labor and business practices,” Bonta’s office said.
AB 5, which took effect in 2020, imposes a higher bar to show that workers are independent contractors rather than employees, who have greater legal protections and can cost up to 30% more for businesses.
California lawmakers exempted many jobs and businesses from AB 5, including “referral agencies” that connect workers and customers, but explicitly did not exempt app-based transportation and delivery services.
That means Uber is subject to the law while pet-sitting service Wag, which has been called “Uber for dogs,” is not.
A three-judge 9th Circuit panel on Friday said the “piecemeal fashion” of the exemptions to the law was enough to keep Uber’s lawsuit alive.
“The exclusion of thousands of workers from the mandates of AB 5 is starkly inconsistent with the bill’s stated purpose of affording workers the ‘basic rights and protections they deserve,'” Circuit Judge Johnnie Rawlinson wrote for then court.
Reuters contributed to this article.