Uber and Lyft ordered to classify drivers in California as employees

11 Aug 2020

Image: © eqroy/Stock.adobe.com

Uber and Lyft are appealing the decision that would force them to provide drivers with fair wages, social security, paid sick days and overtime.

On Monday (10 August), a judge in California ruled that ride-hailing businesses Uber and Lyft must classify their drivers as employees.

The state of California requested a preliminary injunction against the two companies, alleging that they are misclassifying drivers under the state’s new labour law.

The AB-5 law was introduced in California earlier this year with the goal of providing gig workers in industries such as transport, beauty, construction and cleaning with access to better wages, benefits, health insurance, social security, paid sick days and overtime. This would be done by reclassifying these workers as employees rather than contractors.

Uber was one of the businesses that reacted strongly to the AB-5 bill as it passed through the Californian Assembly, and claimed that its drivers would not qualify as employees because they aren’t a core part of the company’s business.

“Drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces,” said Uber’s chief legal officer, Tony West, in a statement on AB-5 last September.

Both Lyft and Uber have already confirmed that they plan to file immediate appeals to block this week’s ruling in California. The state is the largest market for the two companies, which are both headquartered in San Francisco.

The court’s ruling

In his ruling, California superior court judge Ethan Schulman said that it is “obvious” that drivers are “central, not tangential, to Uber and Lyft’s entire ride-hailing business”.

“The court is under no illusion that the implementation of its injunction will be costly,” he added. “There can be no question that in order for [the] defendants to comply with AB-5, they will have to change the nature of their business practices in significant ways, such as by hiring human resources staff to hire and manage their driver workforces.”

California attorney general Xavier Becerra argued that the state and its workers “shouldn’t have to foot the bill when big businesses try to skip out on their responsibilities”.

“We’re going to keep working to make sure Uber and Lyft play by the rules,” he said.

Under AB-5, companies can only classify a worker as an independent contractor if the worker is free from the control and direction of the hiring entity, performs work outside the scope of the entity’s business, and is regularly engaged in an independently established trade, occupation or business of the same nature as the work performed.

Responses to the decision

Commenting on the court’s decision this week, a spokesperson from Uber said: “When over 3m Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry during an economic depression.”

The company claimed that the majority of its drivers “want to work independently”.

A spokesperson from Lyft added: “Drivers do not want to be employees, full stop. We’ll immediately appeal this ruling and continue to fight for their independence. Ultimately, we believe this issue will be decided by California voters and that they will side with drivers.”

Gig Workers Rising is an organisation that supports AB-5 and has been campaigning for Uber and Lyft to provide drivers with fair wages and benefits.

Driver and spokesperson for Gig Workers Rising, Edan Alva, said: “For years, workers have been organising and speaking out against our mistreatment by billion-dollar gig companies who have refused to obey the law. Today, the court sided with workers and not corporations.

“Thousands of misclassified gig workers will receive the wages, benefits, protections and employee status they are legally owed. It is abundantly clear that Uber and Lyft must now comply with the law.”

Kelly Earley was a journalist with Silicon Republic