Uber, Lyft ordered to classify drivers as employees

California judge issues scathing decision granting preliminary injunction

Uber and Lyft will have to provide basic labor protections such as health insurance, paid sick leave and fair wages to their workers in California, a San Francisco judge ruled Monday.

San Francisco Superior Court Judge Ethan Schulman granted a preliminary injunction Monday requiring the two ride-hailing giants to classify their drivers as employees, rather than independent contractors.

Doing so would put them in compliance with A.B. 5, the statewide law that makes it harder for companies dependent on gig workers to skirt labor protections.

The order will not take effect right away, however. Schulman stayed it for 10 days to allow for an appeal, an option both companies have reportedly said they’ll exercise immediately in an effort to block the ruling.

California Attorney General Xavier Becerra filed the lawsuit in May along with San Francisco Attorney Dennis Herrera and his counterparts in Los Angeles and San Diego seeking reclassification of workers, restitution and civil penalties.

Together, they asserted that by failing to give drivers employee status, Uber and Lyft had denied workers the fundamental protections guaranteed to California laborers and passed an estimated $413 million to taxpayers by evading Social Security and Medicare payroll taxes.

Becerra filed the injunction in June, hoping to compel the ride-hailing companies to reclassify employees immediately.

“Uber and Lyft’s long history of flouting the law is over. We are holding them to account for their brazen lawbreaking. This is a victory not only for every driver who has been denied fair wages and benefits by Uber and Lyft, but for the public at large,” Herrera said in a statement.

If upheld, the injunction would likely raise operating costs for the app-based companies.

Their business model largely relies on drivers who trade benefits such as health care, paid leave and unemployment insurance for a flexible schedule, which keeps prices down for companies and customers alike.

It could also force some current drivers to give up the job entirely if they can’t commit to a full-time schedule, a risk Judge Ethan Schulman acknowledged but deemed less grave than the harm that would come from condoning non-compliance.

“Defendants may not evade legislative mandates merely because their businesses are so large that they affect the lives of many thousands of people,” he wrote in the decision.

Monday’s ruling comes only months before this year’s election, when voters will see Proposition 22 on the ballot. Backed by $110 million from Uber, Lyft and DoorDash, the statewide measure would allow rideshare and delivery companies to continue to classify their workers as contractors while mandating they provide enhanced pay, benefits and protection.

“Sacramento politicians and special interests keep pushing these disastrous laws and lawsuits that would take away the ability of app-based drivers to choose when and how they work […],” Yes on 22, the coalition of on-demand platforms funded by Uber, Lyft and DoorDash, wrote in a statement.

Uber and Lyft filed motions to delay the ruling until after voters decide on Proposition 22 or there’s a decision made in Uber’s constitutional challenge to A.B. 5 in federal court.

Schulman resoundingly rejected the requests: “Defendants are not entitled to an indefinite postponement of their day of reckoning. Their threshold motions are groundless,” he wrote.

The judge also dismantled claims from the two ride-share behemoths that drivers perform work “outside the usual course of their businesses,” which, if true, would disqualify them from A.B. 5 requirements.

Schulman wrote that this assertion is “flatly inconsistent” with the statutes that govern their businesses as “transportation network companies” and “flies in the face of economic reality and common sense.”

“To state the obvious, drivers are central, not tangential, to Uber and Lyft’s entire ride-hailing business,” he wrote.

Proposition 22 opponents called the decision a major win in their efforts to secure basic rights for app-based workers, especially during a public health crisis that puts drivers on the frontlines.

“It is abundantly clear that Uber and Lyft now must comply with the law. We are steadfast in our demand that gig companies drop their $110 million ballot initiative, Proposition 22, and reinvest those funds into treating their workers with dignity and respect,” Gig Workers Rising said in a statement.

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