Are Rideshare Drivers Employees or Contractors under AB5?

In a major win for rideshare drivers, Mercury News reports that the California Public Utilities Commission (CPUC) has ruled that these drivers are employees of the rideshare companies they serve. A struggle has been going on for some time between workers seeking the rights and protections of employment and rideshare companies looking to protect their business.

The CPUC ruling was made as a result of Assembly Bill 5 (AB5), a law passed in the state regarding the employment of those working in the gig economy. The bill was signed into law by Governor Gavin Newsom in September 2019 and came into effect this January.

California’s Gig Work Law: Assembly Bill 5

The purpose of AB5 is to protect gig workers by requiring companies to reclassify most independent contractors as employees. To determine if workers should be classified as employees, the law applies a three-pronged test based on the type of work they do and the oversight they experience. Specifically, a worker is an employee unless the following three criteria are met:

• The worker performs services while free from the control or direction of the company.
• The worker performs tasks outside of the usual course of the employing company’s business activity.
• The worker regularly engages in independent work of the same nature that they perform for the company.

Being classified as employees gives gig workers like rideshare drivers certain benefits: minimum wage, employee benefits, expense reimbursement, rest breaks, overtime, worker’s compensation, and other protections usually afforded to employees under California law.

AB5 faced significant push back from companies like Uber leading up to its ratification. Now, a new challenge is being brought by rideshare companies in the form of a ballot initiative.

Are Rideshare Drivers Employees under AB5?

According to CPUC, rideshare drivers should be classified as employees by the companies for which they work. CPUC is charged with regulating ride-hailing companies throughout California. Rideshare apps are known as transportation network companies (TNCs) in the industry.

“For now, TNC drivers are presumed to be employees and the Commission must ensure that TNCs comply with those requirements that are applicable to the employees of an entity subject to the Commission’s jurisdiction,” the CPUC said in its judgment.

Challenges to Rideshare Drivers’ Reclassification

Both Lyft and Uber have expressed their dissatisfaction with AB5 and the effects it may have on their business. These companies argue that forcing them to reclassify workers will negatively impact the services they offer.

“If California regulators force rideshare companies to change their business model it would affect our ability to provide reliable and affordable services, along with threatening access to this essential work Californians depend on,” a statement released by Uber on the subject reads.

The primary challenge to AB5 by ridesharing companies comes in the form of a November ballot initiative. This initiative would exempt rideshare drivers from AB5. The companies propose that these workers should instead be given mileage-based subsidies, healthcare stipends, and occupational insurance without losing the flexibility of contract work. However, labor unions have come out strongly against the initiative arguing that it will create a “new underclass of workers” who lack fundamental protections.

Should You File a Rideshare Drivers Suit?

In early May, California filed a lawsuit against Uber and Lyft regarding their misclassification of rideshare drivers under AB5. After all, the state itself is among those likely to gain significantly due to the reclassification: a study by UC Berkeley found that, if workers had been classified as employees, Uber and Lyft would owe California $400 million for the years 2014 to 2019, according to Mercury News. However, Uber and Postmates have both filed lawsuits against California regarding AB5 which they call “irrational and unconstitutional.”

If you’re a rideshare driver in California who has been denied reclassification under AB5, you may be able to file a suit against your employer. However, it’s possible that your case may be complicated or rendered powerless by the November ballot initiative.

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