By Mike Scarcella

(Reuters) -A U.S. appeals court on Monday rejected a bid by Uber (NYSE:) and subsidiary Postmates to revive a challenge to a California law that could force the companies to treat drivers as employees rather than independent contractors who are typically less expensive.

An 11-judge panel of the 9th U.S. Circuit Court of Appeals in San Francisco upheld a lower court ruling that said Uber failed to show that the 2020 state law known as AB5 unfairly singled out app-based transportation companies while exempting other industries.

The appeals court in its ruling said “there are plausible reasons for treating transportation and delivery referral companies differently from other types of referral companies.”

The California legislature “perceived transportation and delivery companies as the most significant perpetrators of the problem it sought to address — worker misclassification,” Circuit Judge Jacqueline Nguyen wrote for the court.

Uber and a representative for the California attorney general’s office did not immediately respond to requests for comment.

Employees are entitled to the minimum wage, overtime pay, reimbursements for expenses and other protections that are not extended to independent contractors. Uber, Postmates and similar services typically treat workers as contractors in order to control costs.

AB5 raised the bar for proving that workers are truly independent contractors, requiring a company to show that workers are not under its direct control or engaged in its usual course of business and operate their own independent businesses.