Supreme Court Stymies Uber’s Challenge to California Labor Law

The US Supreme Court shut the door on a bid by Uber Technologies Inc. and its subsidiary Postmates Inc. to revive their constitutional challenge to California’s worker-friendly employment classification law.

The justices Tuesday left in place a ruling by the full US Court of Appeals for the Ninth Circuit that threw out the companies’ lawsuit against the measure known as AB 5, which treats most workers by default as employees with broader rights than independent contractors.

Uber, Postmates and other app-based ride-hail and delivery businesses are exempt from AB 5 under Proposition 22, an initiative that the companies funded and voters approved in 2020. State enforcement efforts against the companies seek penalties for alleged violations of AB 5 from before Prop 22’s effective date.

In their challenge to AB 5, Uber and Postmates argued the law deprived them of equal protection of the law by treating companies in their industries worse than others—which were exempted—out of hostility and political favoritism.

But the Ninth Circuit found that the statutory scheme in its entirety reinforces the conclusion that the legislature had rational reasons for that disparate treatment. Lawmakers may have perceived some companies were bigger contributors to worker misclassification, while exempting others that they saw as less of a threat, the appeals court said.

The companies argued in their Supreme Court petition that the Ninth Circuit divined a rational basis by making factual conjectures that went beyond—and even contradicted—their lawsuit’s allegations. Circuits are split on applying the pleading standard in cases that turn on rational-basis review, they said.

California waived its right to respond to the petition.

The case is Olson v. California, U.S., No. 24-269, Petition denied 10/15/24.