An appeals court on Thursday turned down an offer from Uber and Lyft to avoid having drivers continue to be treated as independent contractors while battling California labor law.
A judge issued an injunction in August on a lawsuit filed by California Attorney General Xavier Becerra and three cities, including San Francisco, where Lyft and Uber are based.
The order instructed ridesharing agencies to comply with the new law and stop classifying drivers as independent contractors while a lawsuit is pending in court.
That ruling has been put on hold pending appeal.
“We are addressing whether the court abused its discretion by issuing an injunction preventing Uber and Lyft from classifying their drivers as independent contractors,” the appeals court said in its ruling.
“Since we do not see any legal error, we come to the conclusion that the court acted at its discretion and accordingly confirm the decision made.”
However, the decision could prove contentious as the restraining order will not take effect until California voters determine the fate of an electoral measure that could exempt ridesharing from the law.
Uber and Lyft also have the option to appeal the decision to a higher court.
An election sponsored by the company would classify the drivers as contractors but offer benefits like healthcare.
Uber has argued that requiring drivers to be classified as employees would only leave work for a small fraction of its drivers and that driving would become more expensive.
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