California wants to speed up on Uber, Lyft drivers become employees

California plans to file court documents on Wednesday to force Uber and Lyft to reclassify their drivers as employees in the coming weeks, which companies say could jeopardize their businesses, possibly forcing them to shut down service in California or increase prices dramatically. .

Attorney General Xavier Becerra and attorneys for the city of San Francisco, Los Angeles and San Diego sued Uber and Lyft in May, saying their drivers were misclassified as independent contractors, when they should be employed under AB5, the state law on Work in force that went into effect January 1.

As part of that lawsuit, Becerra and city attorneys are now planning to seek a preliminary injunction requiring Uber and Lyft to treat drivers as employees before the case is heard, according to an email and other legal documents that the attorney general sent the companies. Those materials were reviewed by The Chronicle. A statement filed regarding the preliminary injunction requests a hearing date for July 23.

The lawsuit says that keeping drivers as self-employed robs them of critical workplace protections and gives companies an unfair competitive advantage, as they can circumvent the costs of workers’ compensation, unemployment coverage and other benefits, which they can add 30% to an employer’s labor costs. Uber and Lyft, who have never made a profit, cannot afford any additional expense.

California filing regarding: Uber and Lyft 2020 drivers June 23 (PDF)

California presentation re: Uber and Lyft 2020 drivers June 23 (Text)

Uber and Lyft argue that the flexibility of a non-employee structure is key to their business models, and point to surveys that most drivers prefer to remain independent. The two San Francisco companies, along with DoorDash, Instacart and Postmates, are spending $ 110 million on a November ballot asking California voters to keep their drivers and couriers independent but with some benefits and minimum wages.

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

The election campaign commissioned a study that said companies could only keep about 10-20% of their drivers working under an employee model, ruling out the vast majority who work part-time in favor of those who work entirely. . hours of time

“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,” Uber 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.”

Uber said that more than 158,000 Uber drivers in California would immediately lose their job under an employee model. “We estimate that passenger prices would have to rise 25-111% in different parts of California to cover the rising costs,” Alison Stein, an Uber economist, wrote in a Medium post about the potential impact.

“This is another malicious legal action against drivers that underscores exactly why we are seeking the ballot measure,” Stacey Wells, a campaign spokeswoman, said in a statement.

The attorney general’s office and attorneys for the city of San Francisco, San Diego and Los Angeles did not immediately respond to requests for comment.

AB5, which codifies and clarifies a 2018 California Supreme Court decision called Dynamex, makes it much more difficult for companies to claim that workers are independent contractors.

AB5 has had massive effects across all industries, and many freelancers say it destroys their ability to work. But in terms of government enforcement, the primary goals have been truck driving and the new generation of app-based on-demand services.

The San Francisco district attorney sued delivery company DoorDash this month, saying it is challenging AB5.

The San Diego city attorney sued Instacart for the driver / buyer rating in September. In February, a judge accepted the city’s request for a preliminary injunction to force reclassification, but then suspended its order while Instacart’s appeal is pending. The ruling was limited to workers within San Diego, although the city had asked for a statewide order.

Uber and Postmates sued California in December, asking that AB5’s execution against them be stopped. In February, a federal judge denied his request for a preliminary injunction that would have immediately halted execution in that case, which is still pending.

Carolyn Said is a staff writer for the San Francisco Chronicle. Email: [email protected] Twitter: @csaid