California plans to ask a state court judge to compel Uber Technologies Inc and Lyft Inc to classify their transportation drivers as employees rather than contractors, increasing tension over a new workers law.
The shares of both companies fell almost 8%. A hearing is scheduled for August 6.
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The fight is one of the biggest clashes over the future of the so-called “work economy” of workers, generally over delivery and other application-based services. California is the largest US market for Uber and Lyft.
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In January, California implemented a law that made it more difficult for companies to classify workers as contractors rather than employees. Contractor designation is essential for Uber and Lyft, who are exempt from paying drivers overtime, medical care, unemployment, and workers’ compensation.
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The fight in court also comes as the coronavirus has shuttered much of the business of transportation companies and workers were able for the first time to receive taxpayer-sponsored unemployment benefits under a federal pandemic relief bill.
In a filing before the California Superior Court in San Francisco on Wednesday, California Attorney General Xavier Becerra’s attorneys said his office will file a preliminary injunction request Thursday, forcing the change of status if approved by a judge. .
In a statement, Uber said that most drivers preferred the independence of working as a contractor, that it had made changes due to the law, and that it estimated that more than 158,000 drivers in California would lose jobs if reclassification occurred.
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Lyft in a statement said California should let voters decide on the matter during a November voting initiative sponsored by Uber, Lyft and delivery company DoorDash Inc.
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“If the courts accepted the Attorney General’s request, it would have a devastating effect on millions of Californians at the worst possible time,” said Lyft.
(Reporting by Tina Bellon; Editing by Sandra Maler, Peter Henderson, and David Gregorio)