The legal drama began last year when the California legislature signed Bill 5 (also known as AB5) into law. The intent of the law was to force companies with gig economies such as Uber, Lyft and Doordash to reclassify their workers as employees so that they can receive benefits such as minimum wage, translation, paid leave and health care – the latter of which is became even more important during the pandemic.
The reason this law affects companies like Uber and Lyft is that they are dependent on independent contractors, but AB5 has pushed to explicitly define what that term means. It is the result of a California Supreme Court ruling that required the so-called “ABC test” (already used by the U.S. Department of Labor and more than 30 states) to determine whether a worker has a is independent contractor. Someone can only be considered an independent contractor if they meet three criteria: they have control over how the work is done, they do work that is not in the normal course of the tenant’s business and they have the same type of company itself.
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“Uber and Lyft could not pass this test,” Tia Koonse, director of legal and policy research for the UCLA Labor Center, told Engadget. For one thing, most drivers would not operate a cab service on their own; that would actually be illegal in most areas. Plus, although drivers may have control over their schedules, they do not decide which routes to take or what rates to charge. “[The companies], push drivers through their algorithms to take driving without discrimination. That, without, the drivers have no control over how they do their business. ”
The criteria they absolutely fail at, according to Koonse, is that drivers do absolute work that is in the ordinary course of business for Uber and Lyft. “Lyft and Uber do not provide any other service! All they provide is this taxi company service, ”she said. Uber, for its part, has claimed that it is not a transportation provider and that drivers are not the core of its business, claiming that it is a “technology platform for several different types of digital marketplaces.”
“However, the only thing they technologically deliver is a ride with a person who owns a car,” Koonse said. “Transportation is definitely their business.” Even though Uber offers other services such as food delivery, drivers are still an important part of their business; it’s just that she transports food instead of people.
And even if Uber and Lyft do not think of their drivers as employees, many drivers certainly do. Uber and Lyft often claim that their drivers are mostly part-timers, looking for extra money on the side. But according to a 2018 survey of more than 300 drivers in Los Angeles County, two out of three drivers rely on rides as their main source of income. One in two said it is their only job and three in five ride more than five days a week. It also shows that most drivers want compensation for car maintenance as access to compensation and employee compensation.
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The law has so far been on the side of the governors. After Uber and Lyft refused to comply with the AB5 law that went into effect in January 2020, Attorney General Xavier Becerra and City Attorneys for Los Angeles, San Diego and San Francisco both sued in May. On August 10, Judge Ethan Schulman of the San Francisco Superior Court ruled in favor of the introduction that would block Uber and Lyft from driving as independent contractors.
In response, Uber and Lyft have been furious and claim that they are simply not able to follow the law. It would have a “catastrophic impact” on their businesses, forcing them to raise rates and hire fewer people. They said they would stop their operations instead of following them. Uber CEO Dara Khosrowshahi even said that his company could not deploy all of its drivers in California. “We can not hire 50,000 people overnight,” he said in an interview with the Pivot School podcast.
Except, of course, they had more than 24 hours. “Uber and Lyft had two freaking years to change their business practices, but they act like they’s so shocked,” Koonse said.
“Companies have had years and multiple invitations to follow the law and give workers the status of employees and benefits they are legal,” said Edan Alva, a board member and organizer with Gig Workers Rising, a collective of ride-healing drivers and gig workers fought for workers ‘recognition and workers’ rights.
“Despite multiple court rulings and a deadly pandemic, CEOs of multimillionaires at Uber and Lyft are choosing to continue breaking the law,” he said in a statement. Alva added that shutting down operations in the midst of a pandemic is putting companies in an even worse light. “Eliminating thousands of drivers’ incomes during a pandemic to comply with labor laws is cruel.”
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Khosrowshahi, however, came up with a possible solution, calling on governments to create a third type of classification for gig workers. “Our current system is binary,” he wrote in an op-ed for the New York Times. “[Each] the time a company offers additional benefits to independent workers, the less independent they become. He said that “we need new laws” and that they cannot act on their own. He also proposed a general benefit fund that workers could sign up for specific things like paid leave or health care while still maintaining their independence.
But with this proposal coming now, almost a year after the death of AB5, it’s really far too late. And as Koonse points out, Uber could have implemented such a benefit fund on its own without the help of the government. “I do not know why they do not already provide these benefits,” she said. “I do not know why they have not already considered people as employees. They were two years old. They should already be providing benefits as required by the Affordable Care Act. Period. “
Another alternative that Uber and Lyft were pushing is to implement a franchise-like model, where they would license their brands to car fleet operators in California so that they would not be entirely responsible for hiring employees or it payment of benefits. But that is also not quite the case. “That will not make them eligible in California,” Koonse said. “In California, the franchisee is just as liable for pay and hourly law as the franchisee. We have very strong common liability and common employer laws here. ”
Instead of following the law, Uber and Lyft have decided to partner with DoorDash to raise nearly $ 100 million to fund Proposition 22, a voting initiative that would essentially roll out AB5 and permanently classify ride-haul drivers as independent contractors. In response to the temporary reissue today, Lyft sent the following statement in support of it:
“Although we do not have to stop operations from last night, we do have to fight for independence plus benefits for drivers. That’s the solution to the November vote, and it’s the solution drivers want, because it retains their ability to operate and use the platform as they do now – whenever they want – while also get historic new benefits. Without it, 80-90% of Californians earning on app-based platforms will lose that opportunity. ”
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But while Proposition 22 promises certain benefits for health care plus paid leave, they fall far short of those of traditional employment. According to Koonse, Proposition 22 would override the aforementioned ABC test, so they would not have to provide minimum wage as appropriate benefits.
“They would not need all these hard-won rights that employees are entitled to,” she said. “It will change the constitution itself to make it impossible for the legislature and local authorities to undo it. It’s super creepy. ”
Alva of Gig Workers Rising believes that companies by threatening to shut down are trying to scare politicians and workers into voting for Proposition 22.. He said in a statement:
“The shutdown is an attempt to scare politicians away from regulating abusive business and to scare workers and other voters to support the undemocratic voting initiative of companies, Prop 22. This childish behavior is unacceptable and we demand that Uber and Lyft break the law follow and workers grant the employee status and the benefits we owe. If you do, your life will be saved during this pandemic. We also ask voters to vote no on Prop 22, which is fully funded by emerging companies in hopes of legalizing their exploitation of workers. “
Meanwhile, if Uber and Lyft are unable to appeal their case in court, they will be back on square one. John Cote, a spokesman for the San Francisco City Attorney, told the New York Times: “These companies may have bought them a little more time, but the price is that they – under oath – have to prove that they have an implementation plan that complies with the law […] The court of appeal appeals the bluff of Uber and Lyft. ”
As for Uber and Lyft’s claim that it’s simply not possible to operate in California without independent contractors, Koonse said that, yes, they probably need to increase prices and change the way they work, but that’s part of their responsibility. .
“If their business model is completely dependent on non-payment of minimum wage, overtime, offering required meal and rest breaks, reimbursement of expenses, [is] predicate on payroll and they can not make a profit by treating their staff as employees, then that is their problem, ”she said. “It’s up to her to figure it out.”
