Uber and Lyft have been ordered to classify their drivers as employees by a Californian court after losing an appeal.
The ride-hailing giants classify their drivers as contractors which means they can avoid giving many of the usual rights and benefits afforded to employees. Uber and Lyft argue most drivers prefer the flexibility of so-called gig economy work.
Most groups representing drivers for the companies appear to be in favour of them being classed as employees. “This is a huge victory for drivers,” Gig Workers Rising said in a statement after Uber and Lyft’s appeal was lost.
California Attorney General Xavier Becerra had sued Uber for allegedly breaching a new law which states that companies can only classify workers as contractors if they perform work “outside the usual course” of their business.
In a statement, Becerra wrote:
“Californians have fought long and hard for paycheck and benefit protections. Uber and Lyft have used their muscle and clout to resist treating their drivers as workers entitled to those paycheck and benefit protections.
The courts saw right through their arguments. In the midst of a COVID health and economic crisis, what worker can afford to be denied basic protections like paid sick leave, unemployment insurance, minimum wage, or overtime?
Today’s decision comes on the same day that the federal government reports that more than one million Americans filed for unemployment benefits — and 3 of every 10 of them are gig workers or self-employed. But remember companies like Uber and Lyft that classify gig workers as ‘independent contractors’ don’t pay into unemployment benefit funds for workers.
That means that American taxpayers — not gig companies like Uber and Lyft — are covering the unemployment benefits that gig workers are receiving from the COVID bailout.
That’s not fair to our workers and taxpayers. It’s time for Uber and Lyft to play by the rules.”
The ruling of California’s appeals court will come into effect in 30 days. This means it will be after a public vote on Proposition 22 that would exempt gig companies from AB5, a labour law passed in 2019 which extended employee protections to gig workers.
Uber and Lyft – along with other gig economy companies – are spending $186 million to urge the electorate to vote for Proposition 22. The companies have even put messaging to support Proposition 22 in their apps which has led to a group of drivers suing Uber and seeking $260 million in penalties.
Polling suggests the electorate are very divided on the issue.
The ride-hailing companies have threatened to halt their services in California if they’re forced to classify drivers as employees—claiming it will be economically unviable for them to continue running, especially at current levels. Due to COVID-19 pressures, both companies have already reduced their staffing levels.
There are currently an estimated 325,000 Lyft drivers and 200,000 Uber drivers in California.
“Today’s ruling means that if the voters don’t say Yes on Proposition 22, rideshare drivers will be prevented from continuing to work as independent contractors, putting hundreds of thousands of Californians out of work and likely shutting down ridesharing throughout much of the state,” an Uber spokesperson said.
A similar hardball tactic was used by Uber and Lyft in Austin, Texas after the city voted that the companies must fingerprint their drivers for background checks. The companies ceased their operations two days later but returned around a year later after the law was reversed.
The potential for service disruptions will likely push voters in California towards supporting Proposition 22.