On October 7th, 2024, the U.S. Supreme Court declined to hear a crucial appeal by Uber Technologies, Inc. and Lyft, Inc. regarding ongoing lawsuits initiated by the State of California.
The lawsuits claim that the companies have misclassified their drivers as independent contractors rather than employees. The decision allows for potential continued litigation against Uber and Lyft.
"The California Court of Appeal’s arbitration decision violates the Federal Arbitration Act and conflicts with decisions of the U.S. Supreme Court and other courts," said Theane Evangelis, counsel for Uber. "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."
The Supreme Court's decision follows a California state appeals court ruling that permitted the state's Attorney General and Labor Commissioner to sue Uber and Lyft, despite agreements signed by drivers to resolve disputes through private arbitration. The companies argue that these agreements, which are common across industries, are essential to resolving disputes efficiently and fairly.
"It is also important to note that the Supreme Court is still considering our constitutional challenge to AB5," Evangelis added. "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."
Uber and Lyft’s appeals were based on protecting their ability to treat drivers as independent contractors under the terms of service signed by those workers. These lawsuits, brought by California and other states, seek to enforce employee status on gig workers.
Uber and Lyft have consistently maintained that their business models benefit workers by providing flexibility. However, litigation cases continue against gig economy companies, and many believe that third-party litigation funding (TPLF) is exacerbating the situation by encouraging opportunistic lawsuits.
As lawsuit abuse impacts the gig economy, Uber reiterates its call for tort reform to prevent the proliferation of frivolous lawsuits that ultimately harm both consumers and businesses.
The Bureau of Labor Statistics reported that auto insurance costs saw a 20.6% spike from 2023 to 2024, largely driven by increased claims, legal challenges, and rising litigation costs. Companies like Uber and their drivers are directly impacted by these rising costs.