Uber and Lyft’s Appeal in California Labor Case Won’t Be Heard by Supreme Court

U.S. Supreme Court justices on Monday declined to hear an appeal from Uber and Lyft that sought to block California state labor lawsuits over back pay for drivers.

The decision — or lack thereof — let stand a California appeals court ruling from 2023 that allowed the state lawsuits to proceed because state officials never agreed to be bound by employer arbitration agreements.

“The California Court of Appeal basically said, look, these state agencies, they get to go into court, and they have the authority to undertake enforcement actions to enforce the law,” said Cheryl Sabnis, who practices employer-side labor law in San Francisco for Vedder Price.

“This is not a private dispute necessarily between an individual and a company where you would definitely see a motion to compel arbitration. You know, often those are granted. This is a very different animal,” she added.

Here’s what you need to know:

Four years ago, California Atty. Gen. Rob Bonta and Labor Commissioner Lilia Garcia-Brower sued the ride-hailing companies for the “misclassification of drivers as independent contractors” rather than as employees. The suit sought money “for unpaid wages and penalties owed to workers which will be distributed to all drivers who worked for Uber or Lyft during the time period covered by the lawsuits.”

The lawsuit continued even after voters approved Proposition 22 in 2020 to uphold the authority of companies to classify drivers as independent contractors. Uber, Lyft and DoorDash, among other companies, spent more than $200 million to back the ballot measure, which was approved by 59% of voters in November 2020. The initiative was in response to Assembly Bill 5, a state law that made it more difficult to classify drivers as independent contractors.

In its ruling last year, the state appeals court in San Francisco said California officials were not suing on behalf of drivers so much as enforcing state labor laws. “The public officials who brought these actions do not derive their authority from individual drivers but from their independent statutory authority to bring civil enforcement actions,” Justice Jon Streeter wrote for the California Court of Appeal.

In January, the state Supreme Court refused to hear an appeal. Uber and Lyft then asked the U.S. Supreme Court to weigh in.

The California attorney general’s office applauded the high court’s move on Monday. “We’re pleased by the U.S. Supreme Court’s decision to deny certiorari in this case, allowing the case to proceed in the California Superior Court,” the office said in a statement, adding that it “remains committed to defending the rights of California workers to receive the benefits and protections to which they are legally entitled.”

Driving the story

Uber and Lyft have been locked in a years-long battle with the state of California over how to classify gig workers. In their appeal to the Supreme Court, lawyers for Uber and Lyft, joined by a coalition of California employers, contended that the Federal Arbitration Act overrides state laws and blocks state lawsuits seeking money for employees who already agreed to arbitrate claims as individuals.

The U.S. Supreme Court provided no explanation along with its determination not to hear appeals from Uber and Lyft asking to block state labor lawsuits over back pay for drivers. That kicks the case back to state courts, but it means there’s a continuing lack of clarity, according to UC Santa Cruz sociology professor Steve McKay, who directs the university’s Center for Labor and Community.

“When we have a system where employers pay for a lot of the benefits, who’s covered and how? And that’s actually falling more and more to the state to provide that then if employers aren’t doing it,” McKay said.

There’s a lot of money at stake, he explained.

“When you’re an independent contractor, you’re not covered by worker protections such as wage and hour laws, anti-discrimination laws, and laws providing the ability for collective bargaining. If you’re a contractor, you don’t receive unemployment benefits. When you’re temporarily jobless, you don’t get worker’s comp if you’re injured, and you’re responsible for paying all the payroll tax,” McKay said.

The company take

Two years ago, the justices struck down part of California state law that authorized private attorneys to sue on behalf of a group of employees, even though they had agreed to be bound by individual arbitration.

Theane Evangelis, counsel for Uber, wrote in a statement to KQED, “While the Supreme Court did not take this opportunity to weigh in now, it should do so in the future, holding once again that the FAA preempts state efforts to undermine arbitration agreements.”

“It is also important to note that the Supreme Court is still considering our constitutional challenge to AB5,” she continued. “As we explained in detail in our complaint in that case — and to which a three-judge panel of the Ninth Circuit unanimously agreed — in enacting AB5, the California legislature unfairly targeted my clients out of animus rather than reason. We’re asking the U.S. Supreme Court to grant review and give us our day in court.”