Uber and Postmates lost a court action to slam the brakes on potential enforcement of a California law that could force the ride-hailing firm to reclassify its drivers as employees.

In a Monday order, U.S. District Judge Dolly Gee of the Central District of California rejected a motion for preliminary injunction that Uber and Postmates filed over California's Assembly Bill 5, which sought to reclassify independent contractors in certain industries to employees in order to provide better wages and benefits while curbing what they considered exploitation of California's workers. Uber and Postmates insisted that the threat of enforcement by city and state officials required the judge to grant the motion.

Gee rejected that request, despite also finding that Uber and Postmates had presented evidence of "irreparable harm" given that California legislators had targeted ride-hailing firms when they passed the bill, which became effective Jan. 1.

"Plaintiffs have not shown serious questions going to the merits—the critical factor in determining whether to issue a preliminary injunction—and, though company plaintiffs have shown some measure of likelihood of irreparable harm, the balance of equities and the public interest weigh in favor of permitting the state to enforce this legislation," she wrote.

She ruled that Uber and Postmates had failed to prove they would succeed on the merits of their injunction claim, brought in a Dec. 30 lawsuit alleging that AB5 was unconstitutional because it violated the equal protection and due process clauses of the Fourteenth Amendment, the Ninth Amendment, the Contracts Clause, among other things.

Representatives of California Attorney General Xavier Becerra, whose office is defending the law in the lawsuit, said in an emailed statement: "We're pleased with the decision. Our office has and will continue to defend laws that are designed to protect workers and ensure fair labor and business practices."

Gibson, Dunn & Crutcher represented Uber and Postmates in the case.

In a statement, Postmates called Gee's ruling a "procedural decision" that "comes as a disappointment to the on-demand workers" who filed the suit. The statement said the decision could be appealed to the U.S. Court of Appeals for the Ninth Circuit.

"As witnessed by truckers, freelance journalists, and countless other occupations, AB5 is undercutting workers across the economy," the statement said, "and Postmates remains committed to the modernization of worker classification and worker protections."

The ruling follows a hearing Friday during which Gee appeared unconvinced by the arguments of Gibson Dunn partner Theane Evangelis, speaking for Uber and Postmates and two of their drivers serving as plaintiffs in the lawsuit.

Friday's hearing drew spectators from Mobile Workers Alliance and Rideshare Drivers United, both of which support AB5. The U.S. Chamber of Commerce and several others had filed amicus briefs supporting Uber and Postmates.

As at the hearing, Gee was not convinced that the state would enforce AB5 against Uber and Postmates, both of whom have challenged the law's application to them. That's despite her conclusion that both companies "established some measure of irreparable harm stemming from threatened municipal enforcement actions."

"Plaintiffs correctly point out, however, that the record contains some evidence that AB5 targeted company plaintiffs and other gig economy companies, and that some lawmakers' statements specifically complained about Uber," she wrote. "But such targeting, even if it rises to the level of animus toward gig economy companies, does not establish an equal protection violation where the statute addresses legitimate concerns of deleterious misclassification of workers in many industries, not just the gig economy."

That's especially true, she wrote, given that AB5 codified existing case law following the California Supreme Court's 2018 decision in Dynamex Operations W. v. Superior Court, which set up a test to determine whether employees should be independent contractors or employees.

Although the state did "not provide specific justifications for every exemption" in AB5, the explanations for those exemptions were rational because they involved the "hallmarks of independent status," she wrote. The judge found there were differences between ride-hail drivers and exempted direct salespersons, who chose their sales targets and locations, or movers who work for a business.

"Plaintiffs have not shown that their work arrangements are so similar to exempted work arrangements that exempting Uber and Postmates from AB5's application would further the state's interest in preventing misclassification of independent contractors," she wrote.

Also, AB5 did not prevent the individual Uber and Postmates drivers from continuing the same profession as employees.

Uber did not expand on its statement following Friday's hearing, which called AB5 a "biased and overtly political process that ignored the voices of the workers most affected by the law and granted preferential treatment to an arbitrary group of industries."

The case is one of at least three lawsuits filed to halt enforcement of AB5. On Jan. 16, U.S. District Judge Roger Benitez of the Southern District of California granted a preliminary injunction motion in a separate case brought by the California Trucking Association. In that case, he found that the plaintiff had raised a plausible argument that the Federal Aviation Administration Authorization Act of 1994 preempted AB5 as it pertained to motor carriers.