The Supreme Court on Monday declined to hear an appeal by ride-sharing companies Uber and Lyft, who sought to block the state of California from pursuing labor lawsuits over drivers’ status as contractors.
The decision allows the California attorney general and labor commissioner to pursue the lawsuits, which claim the companies owe money to drivers who were misclassified as independent contractors rather than employees in a lawsuit dating back four years.
Uber and Lyft have argued that federal law bars states from suing on behalf of anyone seeking compensation who signed agreements to arbitrate claims privately rather than in court. The state argues it is not suing on behalf of drivers, but is instead seeking to uphold the state’s labor laws.
In 2020, California Attorney General Rob Bonta and Labor Commissioner Lilia Garcia-Brower filed two lawsuits against the ride-sharing companies for the “misclassification of drivers as independent contractors” rather than as employees.
The companies’ decision to do so left “workers without protections such as paid sick leave and reimbursement of drivers’ expenses, as well as overtime and minimum wages,” Garcia-Brower said in a statement at the time.
The state seeks compensation for the workers, as well as additional penalties. If California wins in court, the money would be distributed to Uber and Lyft drivers during the time period covered by the lawsuits.
A state appeals court in 2023 ruled against the companies in their challenge to the lawsuits, arguing that the federal law did not apply because state officials did not agree to the arbitration agreements.
“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,” Judge Jon Streeter wrote in his opinion at the time.
The Supreme Court’s decision on Monday means Uber and Lyft could owe back pay to tens of thousands of California drivers unless the companies and the state reach a settlement.
The lawsuit persisted despite voters’ approval of Proposition 22 in 2020 to allow companies to classify drivers as independent contractors, with additional benefits. Uber, Lyft, and DoorDash, as well as others, spent over $200 million to back the ballot measure, approved by nearly 59 percent of voters. It was challenged in state court in Castellanos v. State of California, but was largely upheld by the California Supreme Court in July of this year.
Proposition 22 was introduced as a response to Assembly Bill 5, a law that made it more difficult to classify drivers as independent contractors. AB 5 went into effect in January 2020. Uber also sued the state in a separate lawsuit over the law, but the 9th U.S. Circuit Court of Appeals ruled against the company in June.
When the California Supreme Court declined in January to hear an appeal in its other lawsuit against the state, Uber and Lyft asked the U.S. Supreme Court to get involved.
“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 state attorney general’s office said in a statement.
California is not the only Democratic-led state that has accused Uber and Lyft of paying drivers less than minimum wage, overtime pay, reimbursements for expenses, and other benefits by employing them as independent contractors.
In Massachusetts in June, Uber and Lyft agreed to adopt a $32.50 hourly minimum pay for drivers in the state and pay $175 million to settle a lawsuit brought by the state.
Uber also threatened to stop serving Minnesota last year over pay disputes similar to those in California. The company remained operating after the proposed changes were vetoed by the governor. State lawmakers later passed a measure to raise pay, but not as much as had been originally considered.
Reuters contributed to this report.
