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Judge Grants Lyft and Uber Drivers Employee Status

Ride-hailing companies may no longer classify drivers as independent contractors, a California judge orders. Lyft halts services in California.
By Simpluris Research
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According to Bloomberg, California Judge Ethan P. Schulman ruled in the California v. Uber Technologies Inc. and Lyft Inc. case that the ridesharing titans must treat their drivers as employees rather than independent contractors. However, he paused the injunction for 10 days so the companies can appeal his decision. In an update by The Wall Street Journal, Lyft made an announcement to halt services in California to avoid violating the state law, continue working toward a model that satisfies drivers and riders, and push voters to say yes to Prop 22.

After drivers sought class-action certification against the ridesharing companies, California Attorney General Xavier Becerra and the city attorneys of San Diego, Los Angeles, and San Francisco also filed a lawsuit alleging that Lyft and Uber "continue to misclassify their drivers—and have exploited hundreds of thousands of California workers—in direct contravention of California law," Assembly Bill 5 (AB5) and Business and Professions Code Section 17200

Xavier Becerra

California Attorney General Xavier Becerra

California State Assembly passed AB 5, also known as "gig workers bill," which is the controversial new law that codifies the three-factor “ABC” test. It essentially raises the bar in determining how a company may classify its workers. Effective January 1, 2020, under the ABC test, a worker is considered an employee unless the company hiring the worker establishes all of the following three prongs:

  1. the worker is free from the control and direction of the company in connection with the performance of the work, both under the contract for the performance of such work and in fact; 
  2. the worker performs work that is outside of the “usual course” of the company’s business; and 
  3. the worker is customarily engaged in an independently established trade, occupation, or business that is of the same nature as the type of work performed for the company.

The lawsuit claims that Uber and Lyft misclassify their drivers as independent contractors because: "They hire and fire them. They control which drivers have access to which possible assignments. They set driver quality standards, monitor drivers for compliance with those standards, and discipline drivers for not meeting them. They set the fares passengers can be charged and determine how much drivers are paid." 

Simply put, regardless of whether they communicate via an app, "Uber and Lyft are transportation companies in the business of selling rides to customers, and their drivers are the employees who provide the rides they sell." 

As a result, the lawsuit claims that the ride-hailing service companies engaged in unlawful and unfair business practices, which:

  • deprives drivers of their rights as employees to minimum and overtime wages, business expenses, meal and rest periods, wage statements, paid sick leave and health benefits, and social insurance programs.
  • harms law-abiding competitors and would-be competitors.

Shulman wrote that Uber and Lyft's “insistence that their businesses are ‘multi-sided platforms’ rather than transportation companies is flatly inconsistent with the statutory provisions that govern their businesses as transportation network companies."

Becerra said in a statement, "While this fight still has a long way to go, we’re pushing ahead to make sure the people of California get the workplace protections they deserve.” 

An Uber statement to Bloomberg said that most of its drivers "want to work independently...When over 3 million 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.”

Proposition 22

Proposition 22

Protect App-Based Drivers and Services Act

Uber, Lyft, and DoorDash are leading a political challenge of AB5 through Proposition 22, "Protect App-Based Drivers and Services Act," which will be on November's ballot for California voters to decide if drivers should be considered independent contractors or employees. Gig economy companies claim that app-based rideshare and delivery drivers should be exempt from the law's restrictions that seem geared toward a more traditional employment model. 

The "Yes on Prop 22" campaign states that an exemption to AB5:

  • protects the basic legal right to work as independent contractors;
  • allows app-based rideshare and delivery drivers flexibility to set their own hours for when, where, and how they work;
  • requires delivery network companies to offer new protections and benefits, including minimum compensation levels, insurance to cover on-the-job injuries, automobile accident insurance, healthcare subsidies for qualifying drivers, protection against harassment and discrimination, and mandatory contractual rights and appeal processes; and
  • improves public safety by requiring criminal background checks, driver safety, training, and other safety provisions to help ensure app-based rideshare and delivery drivers do not pose a threat to customers or the public.

Those against Prop 22 argue that "These billion-dollar corporations still refuse to offer their workers what every other employee in California is entitled to earning the minimum wage for all hours worked, social security, normal reimbursements for their costs, overtime pay, and the right to organize."

Lyft said in a statement, "Ultimately, we believe this issue will be decided by California voters and that they will side with drivers.” 

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