California’s attorney general is suing Uber and Lyft along with city attorneys from Los Angeles, San Diego and San Francisco, alleging the ride-hail giants are illegally misclassifying drivers in order to avoid paying for worker benefits.
The lawsuit filed Tuesday is a move to enforce Assembly Bill 5, a rule that took effect at the beginning of the year requiring many companies to classify workers as employees rather than independent contractors.
Though the bill was aimed directly at Lyft and Uber, the companies, along with other gig economy giants like DoorDash, Instacart and Postmates, continue to classify their workers as independent contractors.
“These companies are headquartered in San Francisco,” said San Francisco City Attorney Dennis Herrera. “We are going to police our own to ensure the law is followed, workers are protected, and the marketplace is fair.”
Workers who are classified as independent contractors are not guaranteed protections like minimum wage, overtime pay, paid sick leave, workers’ compensation for on-the-job injuries, and wage replacement programs like disability insurance.
Private contractor classification also allows ride-hail and delivery companies to avoid paying for things like vehicle upkeep and insurance.
According to the lawsuit, taxpayers, who fund safety net programs that gig workers often turn to in times of need, end up footing the bill — a reality highlighted by the coronavirus pandemic which has slashed the income of many gig workers.
“Uber and Lyft drivers who contract the coronavirus or lose their job quickly realize what they’re missing,” Attorney General Xavier Becerra said. “But it’s not just these workers who lose. American taxpayers end up having to help carry the load that Uber and Lyft don’t want to accept.”
Companies that misclassify workers also gain an unfair advantage over law-abiding businesses, the lawsuit says.
The lawsuit seeks $2,500 for each AB5 violation, with the possibility of an additional $2,500 for violations against senior citizens or individuals with disabilities.
AB5 employs a three-part test to determine whether companies are required to classify workers as employees, and companies must prove all are false to be granted an exemption: If the company controls how workers perform tasks, if the work is a routine part of the company’s function, or if the worker does not usually perform similar work outside of working for the company, then they are an employee.
The lawsuit argues both Lyft and Uber fail this test.
But the companies maintain that their drivers are classified correctly, and argue reclassification would hurt worker flexibility and hours. Uber said that it will contest the lawsuit. Lyft issued a more inexplicit statement.
“We are looking forward to working with the Attorney General and mayors across the state to bring all the benefits of California’s innovation economy to as many workers as possible,” Lyft said in a statement. “Especially during this time when the creation of good jobs with access to affordable health care and other benefits is more important than ever.”
Uber and Postmates filed a lawsuit back in December seeking to shield themselves from AB5 enforcement, and Uber, Lyft, DoorDash, Instacart and Postmates are currently spending hundreds of millions of dollars on a measure aimed at the November ballot that could exempt them from AB5.
Campaigners for the exemption, the Protect App-Based Drivers & Services coalition, argue the latest lawsuit could force millions out of work when many are already struggling, as well as eliminate essential services amid the pandemic.
Ultimately the lawsuit will join in a tangle of existing litigation already making its way through the courts as enforcement is sought or exemptions are requested.
“There are going to be many lawsuits and many attempts at legislation,” said Bill Sokal, a labor lawyer and San Francisco State University labor studies lecturer. “I wouldn’t necessarily trust anyone who would say any one particular lawsuit is more significant than another. Best I can say is that the battle continues.”