California plans to ask the judge to compel Uber and Lyft to reclassify drivers as employees

06/25/2020 Business


California Attorney General Xavier Becerra and a coalition of city attorneys intend to request a preliminary injunction this week to compel the two transportation companies to comply with the new state law, according to a press release issued on Wednesday. .
The measure follows a lawsuit filed in May, alleging that companies are misclassifying their workers in violation of California law known as AB-5, which went into effect on January 1.

“It is time for Uber and Lyft to fulfill their responsibilities and the people who make them successful: their workers,” Becerra said in a statement about the mandate the state intends to present. “Misclassifying your workers as ‘consultants’ or ‘independent contractors’ simply means you want your workers or taxpayers to pay the bill for your employer obligations … We are seeking a court order to compel Uber and Lyft to play by the rules. “

Under the law, companies must demonstrate that workers are free from company control and perform work outside the normal course of business to classify workers as independent contractors rather than employees.
California is suing Uber and Lyft for alleged misclassification of workers
The lawsuit accuses Uber and Lyft of depriving the workers of protections, which include a minimum wage, overtime, paid sick leave and unemployment insurance, to which they would be entitled as employees. Uber, Lyft and DoorDash have each put $ 30 million behind a voting initiative, with the additional support of Postmates and Instacart. If passed, it would exempt them from AB-5, but would offer drivers some benefits.

“We believe the courts should let voters decide,” Lyft spokeswoman Julie Wood said in a statement provided to CNN Business. “Trying to force drivers to relinquish their independence 100 days before the election threatens to leave one million more people out of work at the worst possible time.”

Wood said the company plans to oppose the push to reclassify workers.

“The vast majority of drivers want to work independently, and we have already made significant changes to our application to ensure that it continues to be so under California law,” an Uber spokesman said in a statement. “When more than 3 million Californians are out of work, our elected leaders should focus on creating jobs, not trying to shut down an entire industry.”

AB-5 has long been viewed as a possible existential threat to many concert economy companies such as Uber and Lyft, which developed their businesses largely by treating their workers as independent contractors rather than employees. In addition to not receiving basic worker protections, drivers also pay their own expenses, including gasoline and vehicle maintenance.

The renewed push to reclassify its workers to the state comes at an uncertain time for both companies as they battle the pandemic, which significantly reduces demand for travel. Both Lyft and Uber have suffered layoffs and have a long history of large losses.

Each of the Uber and Lyft shares ended Wednesday with a drop of more than 7%, while the Dow and S&P 500 fell approximately 2.5%.

Alison Stein, an Uber economist, said California stocks could threaten “158,000 additional job opportunities each quarter for Californians who earn using Uber.”
Weeks before the law went into effect, Uber began making a series of product changes to its California application with the stated promise to allow drivers to “reap full independence” from the platform.

A legal filing on the preliminary injunction requests a hearing on July 23.

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