Labor & Employment Law Daily Wrap Up, REMEDIES, DAMAGES—S.D.N.Y.: New York City preliminarily enjoined from enforcing law protecting rideshare drivers, (Jul 23, 2026)

By Todd Harrison, J.D.

“The sponsor’s repeated hostility toward Uber and Lyft, together with the conclusory justification for singling them out, supports Plaintiffs’ contention that the Law benefits a favored group rather than protecting a broader societal interest.”

Granting Uber and Lyft’s motions for a preliminary injunction against a New York City law designed to protect rideshare drivers from “deactivation” without formal notice, a federal district court determined that the record failed to establish that wrongful deactivation was a problem that affected more than a narrow group. Further, although the record documented hardships that wrongful deactivation imposes on drivers, it did not estimate how many of those deactivations were, in fact, wrongful, nor did it establish that the group likely to require its protections was large in the context of the public served by the city council. Because the rideshare companies were likely to succeed in showing the law permits a severe impairment of their contracts, a preliminary injunction was appropriate (Uber Technologies, Inc. v. City of New York, Nos. 1:26-cv-4893-GHW and 1:26-cv-4931-GHW (S.D.N.Y. July 21, 2026)).

Local Law 52. In June 2023, the New York City Council introduced Int. No. 1078 of 2023, prompted in part by news reports of rideshare passengers submitting false complaints to obtain ride refunds and by drivers complaining of arbitrary deactivations. Although this measure did not advance, successor measures were brought forth which would have prohibited high-volume for-hire service vehicles from deactivating drivers except for just cause or a bona fide economic reason, required an informal resolution process, and imposed advance notice and progressive discipline requirements, with exceptions for immediate deactivation in cases of imminent safety concerns. After much back and forth, the council enacted Local Law 52 over a mayoral veto on January 26, 2026.

Local Law 52 extends existing workplace protection enforcement tools to rideshare drivers and was set to take effect on July 28, 2026. On June 9, Uber filed a complaint against the city, asserting that Local Law 52 violates the Contract Clause, the Due Process Clause, and the First Amendment, and simultaneously moved for a preliminary injunction enjoining enforcement of the law pending resolution of the litigation. The following day, Lyft filed a complaint asserting substantially similar claims while also moving for a preliminary injunction. Here, the court considered the motions for a preliminary injunction.

Likelihood of success. First, the court addressed the rideshare companies’ likelihood of success on the merits. The court found they had shown a likelihood of success on their Contract Clause claims.

Prior deactivations. As a threshold matter, the court noted that the Contract Clause reaches the agreements governing prior deactivations. The fact that the companies exercised their contractual deactivation authority before Local Law 52 was enacted did not remove the agreements governing those decisions from the Contract Clause’s protection. Those agreements came into effect before Local Law 52, which now alters the legal consequences of decisions made under them by requiring the companies to reopen prior deactivations and restore platform access unless the deactivations satisfy newly imposed statutory standards.

As a result, the provision does not merely regulate any new relationship that may arise between the companies and previously deactivated drivers. It requires the companies to reverse the continuing consequence of decisions made under pre-enactment agreements. Accordingly, the agreements governing prior deactivations fall within the Contract Clause’s protection, explained the court.

Substantial impairment. The companies had shown a likelihood of success in establishing that Local Law 52 substantially impairs their contracts with drivers, as they were likely to establish that Local Law 52 undermines their contractual bargain with drivers, said the court, noting that the deactivation provisions contained in the contractual agreements between the companies and drivers define a central aspect of their relationship, and Local Law 52 undermines that authority.

In addition, continued the court, Local Law 52 further undermines the companies’ contractual bargain by stripping them of final authority over deactivation decisions by subjecting those decisions to review by an outside factfinder if challenged.

Reasonable expectations. The companies were also likely to establish that Local Law 52 interferes with their reasonable expectations, explained the court. Although the city extensively regulates for-hire vehicles, drivers, and services, that regulation did not pertain to the contractual rights that Local Law 52 displaces. Further, although the history of the law showed that the companies knew the city was considering restrictions on deactivation, knowledge that the city might enact such restrictions did not make them foreseeable in the relevant sense.

Safeguarding or reinstating rights. Finally, the companies were likely to establish that Local Law 52 leaves them with no means to safeguard or reinstate their contractual deactivation rights. Although the companies may continue to write deactivation standards in their agreements, those standards will remain subordinate to Local Law 52 whenever the two conflict, observed the court. Thus, the law does not temporarily suspend the companies’ rights or leave them a means to restore those rights later. It prevents the companies from exercising them for as long as the law remains in effect.

Taken together, these considerations show a severe impairment, said the court, requiring it to turn to the question of whether Local Law 52 serves a significant and legitimate public purpose and, if so, whether the means chosen are reasonable and necessary to serve that purpose.

Legitimate public purpose? In answering that question, the court determined that the companies were likely to establish that Local Law 52 does not further a significant and legitimate public purpose. Although the record documented real hardships suffered by drivers who have experienced deactivation, the court explained that a law does not serve a legitimate public purpose merely because it confers a meaningful benefit to an affected group. It must pursue a larger societal interest.

Here, the record did not establish that the problem the legislation was seeking to solve was widespread. As an estimate of the number of deactivated drivers, applying Uber’s one percent rate of deactivations to its number of 87,207 total drivers, the total number of annual deactivations in New York City would be approximately 872. Further, the city did not contend that all deactivations are wrongful or arbitrary. Thus, the record established that the statute was designed to benefit only a small group of individual drivers.

As to the city’s argument that deactivation may cause general harm to the public in the form of deactivated drivers defaulting on vehicle payments or rent and relying on public assistance, the court noted that the record documented drivers’ reliance on platform income and continuing personal expenses. It did not identify increased public expenditures or other effects on the city and its residents as the problem the city council had set out to remedy.

Further, the record did not show that the city council considered any of the other potential adverse impacts of the law on the citizens of New York, explained the court. Twenty-two million rides are taken by passengers in a single month. The council did not consider whether the law would make travel less pleasant or safe for these millions of rides. On this record, the companies were likely to show that the law was passed in the pursuit of the interests of a narrow class, rather than in service of a broader public interest, said the court.

Reasonable and necessary means. Next, the court considered whether the means chosen to accomplish the law’s purpose were reasonable and necessary. Because the court concluded that Local Law 52 does not serve a significant and legitimate public purpose, it explained that it need not decide whether the means chosen to accomplish the city’s asserted purpose are reasonable and necessary. Nevertheless, it noted that that the companies raised substantial questions on this issue.

In addressing those questions, the court determined that, on balance, the factors weighed against the reasonableness of Local Law 52. It permanently impairs the companies’ contractual deactivation rights, and the record does not connect several central features of the statutory regime—including its expanded just cause inquiry, progressive discipline requirement, mandatory reinstatement remedy, and a seven-year lookback—to the identified problem of wrongful deactivations.

Irreparable harm. With regard to whether the companies were likely to suffer irreparable harm absent a preliminary injunction, the court determined that they would. Although the companies had established irreparable harm based on the likelihood of success on their Contract Clause claim alone, the court still took a moment to address the additional, independent harms identified in the record.

Safety and quality are core components of the companies’ brands, noted the court. The law could require companies to leave a driver on their respective platforms for several days after the companies had determined that the driver should be removed, thus potentially harming their goodwill and reputation. Further, the court found that the most serious consequence of the law’s notice and reinstatement requirements would fall on a passenger exposed to an avoidable safety risk.

In addition, although the court noted that it does not rely on compliance costs as an independent basis for irreparable harm, “the need to reconstruct years of historical decisions and create new review systems reinforces the breadth and immediacy of the constitutional and operational harms described above.” Accordingly, the companies had established that they were likely to suffer irreparable harm absent preliminary relief.

Equities, public interest. Finally, with regard to the balance of equities and public interest, the court found that this tipped in the companies’ favor. “Reducing rider confidence may reduce demand, which would in turn reduce earning opportunities for the much larger population of drivers who remain active on the platforms,” said the court.

A preliminary injunction, continued the court, would preserve the status quo. Drivers would continue to have access to the companies’ existing review procedures while the litigation proceeds and would not be left without a mechanism to challenge a deactivation while the court determines the constitutionality of the city’s new law.

The city’s asserted hardship, meanwhile, is principally the temporary postponement of a new regulatory regime and the potential wrongful deactivation of a very small but undetermined number of drivers, explained the court.

In addition, the public has a substantial interest in safe transportation and in preserving candid reporting of dangerous conduct. Maintaining the existing standards avoids introducing additional risks to public safety while this litigation proceeds, concluded the court, enjoining the enactment of Local Law 52 in full.

The case is Nos. 1:26-cv-4893-GHW and 1:26-cv-4931-GHW.

Judge: Woods, G.

Attorneys: Karen L. Dunn (Dunn Isaacson Rhee) for Uber Technologies, Inc. and Uber USA, LLC. Scali Riggs, New York City Law Department, for City of New York.

Companies: Uber Technologies, Inc.; Uber USA, LLC

Cases: RemediesDamages ContractClaims IndividualRights NewYorkNews