The problem here seems to be twofold: ambiguous policies, and little care for transparency and communication.
On the policies side: Upwork doesn't seem to have real written rules in place on at what point too many jobs for one company puts them at risk of violating the CA freelancer law. This makes it easy for a person to inadvertently place their livelihood at risk by doing what Upwork would otherwise be encouraging them to do -- more business through Upwork.
On the transparency side: Once someone breaches this invisible line, Upwork doesn't feel the need to communicate it to anyone. That would be expensive, and it seems to cut against Upwork's interests, so the wire is tripped silently and the party on either side of the transaction basically goes mad with confusion while they try to figure out what happened, until they finally exhaust themselves and give up.
Each of these is inexcusable and absolutely needs to be civil offense. The stories of people silently and irreversibly shut down by impenetrable platforms and then not able to even reach a human who can explain what went wrong are legion with internet-based services. Now that those services form the basis of a large swath of working people's livelihoods, this absolutely needs to end. Part of the cost of doing business should be clear rules and clear lines of communication when the rules need to be enforced, and an appeals process staffed by humans, or else these companies should be forced to pay out for lost income.