Uber, Lyft may be forced to make drivers employees under new California court order

Uber and Lyft may be forced to reclassify their drivers as employees in California in coming weeks. The state’s Attorney General Xavier Becerra announced Wednesday that he’s filing a preliminary injunction against the two companies, accelerating an already heated battle between California and the ride-hailing services.

The injunction comes after Becerra and the city attorneys of Los Angeles, San Diego and San Francisco sued Uber and Lyft last month. They say the companies are violating a state law called AB 5 by refusing to make their drivers employees.

“It’s time for Uber and Lyft to own up to their responsibilities and the people who make them successful: their workers,” Becerra said in a statement. “Misclassifying your workers as ‘consultants’ or ‘independent contractors’ simply means you want your workers or taxpayers to foot the bill for obligations you have as an employer… That’s not the way to do business in California.”

The debate over gig worker benefits has raged for years. Several lawsuits have been filed against Uber, Lyft and other gig economy companies dating as far back as 2013. But now, as the novel coronavirus pandemic has shaken society, that debate has been amplified.

Currently, most workers for gig economy companies, like Uber, Lyft, Instacart, Postmates and DoorDash, are classified as independent contractors. That means those workers pay for their own car, phone, gas and vehicle maintenance. They also aren’t provided basic labor benefits, such as minimum wage guarantees, overtime pay, health insurance and sick leave.

Under AB 5, which went into effect in California on Jan. 1, companies that use independent contractors could be required to convert their workers into employees. 

California was the first state to pass a law explicitly around gig workers. But other states have begun to follow suit. Washington, Oregon, New York and New Jersey are now considering legislation similar to AB 5.

The companies have actively fought against AB 5 since before the law even passed last fall. Both Uber and Lyft are struggling to become profitable, and labor costs could add millions of dollars to their bottom lines. 

The two ride-hailing companies are part of a coalition of gig economy companies sponsoring a November ballot initiative aimed at making them exempt from AB 5. In all, $110 million has been raised to support the measure, known as the “Protect App-Based Drivers and Services Act,” and Uber and Lyft said they’ll spend more on the campaign if need be. The measure will officially be added to California’s ballot on Thursday.

“We believe the courts should let the voters decide,” a Lyft spokeswoman said. In regard to the preliminary injunction, she said, “It would be incredibly harmful to millions of people and the California economy to grant this motion 100 days before the voters decide, and we will oppose this motion.”

Uber has warned that if forced to make its drivers employees, 76% of them could lose their work on the ride-hailing platform. The company says this is because prices could rise and then less people would use Uber for rides.

“The vast majority of drivers want to work independently, and we’ve already made significant changes to our app to ensure that remains the case under California law,” an Uber spokesman said. “When over 3 million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry.”

While many drivers say they prefer to remain independent contractors, thousands of others have widely supported AB 5. On Wednesday, a caravan of about 50 drivers protested in front of Uber CEO Dara Khosrowshahi’s house in San Francisco, demanding the company drop the November ballot measure.

“Minimum wage laws and other labor protections were created to make sure that even people in poverty can have the ability to exist in dignity and earn the fair value of their work,” Edan Alva, an Uber driver and organizer, said during the protest. “Drivers are not allowed to go into the Uber CEO’s office and take his money away, why should gig companies be allowed to rob the value of our work?”

If the judge grants Becerra’s preliminary injunction, Uber and Lyft would be forced to comply with AB 5. Becerra is set to file the injunction request on Thursday and is asking for a July 23 hearing date, according to Politico.

“Drivers are employees under California law, and there’s no reason they should be denied basic workplace benefits,” San Francisco City Attorney Dennis Herrera said in a statement. “Despite a campaign of misinformation, nothing prevents Uber and Lyft from properly classifying drivers and giving them flexibility.”