Uber and Lyft Must Classify Drivers As Employees, Court Says

Uber and Lyft were recently ordered to comply with California state labor laws requiring the companies to classify their drivers as employees instead of independent contractors.

A unanimous decision from a California appeals court upheld a previous ruling by a lower court in which Superior Court Judge Ethan Schulman ordered Uber and Lyft to classify their drivers, currently considered independent contractors, as employees of the companies.

The companies railed against the August decision, calling it “radical” and “unprecedented.” However, the appeals court disagreed with several of the companies’ arguments.

First, Uber and Lyft claimed that they wouldn’t be able to rapidly comply with the injunction. Despite these arguments, the appeals panel found that the rideshare companies have had over two years to comply. The initial court decision which sparked the California independent contractor law was handed down in April 2018. At this time, according to the court, the companies should have started to prepare for reclassification.

The companies had also claimed that the injunction would cause “irreparable harm” to both the rideshare apps and their drivers. Allegedly, Uber and Lyft drivers thrive on having flexible work schedules – something which wouldn’t necessarily work for employee drivers.

However, the appeals court noted that being an employee doesn’t necessarily preclude a flexible schedule. In fact, nothing in the injunction order prevents this flexibility, according to the court.

Due to these and other arguments, the panel unanimously determined that Uber and Lyft must comply with independent contractor classification requirements and provide their drivers with the benefits they are owed.

“Uber and Lyft have used their muscle and clout to resist treating their drivers as workers entitled to those paycheck and benefit protections,” Attorney General Xavier Becerra said in a statement, according to CNN. “It’s time for Uber and Lyft to play by the rules.”

Based on this decision, Uber and Lyft will be required to follow independent contractor classification requirements under California Assembly Bill 5.

AB 5: Overview

California Assembly Bill 5, or AB 5, went into effect on Jan. 1, 2020 after being signed into law by the state’s governor Gavin Newsom in September 2019. The bill implements strict requirements for classifying workers as independent contractors by expanding on a 2018 California Supreme Court decision from 2018.

In Dynamex Operations West Inc. v. Superior Court of Los Angeles, the state Supreme Court ruled that workers are required to satisfy a three pronged “ABC” test in order to be classified as an independent contractor. The three requirements of the law are:

• Workers are free to perform services without the direct control or direct of their employer.
• Workers perform tasks which are outside the usual course of business for their employer.
• Workers are engaged in an independently established trade which matches the type of work done for their employer.

Under these laws, it is much more difficult to classify workers as independent contractors. As a result, former independent contractors may now be entitled to the many benefits allowed to employees under California state law.

At the time of the bill, Uber, Lyft, and other delivery apps like DoorDash were put in the spotlight as their operations could be significantly impacted by the restrictions of the law. Although Uber and Lyft vowed to fight against the bill, the appeals court’s recent decision means that they must classify their workers as employees.

Uber and Lyft Support Proposition 22 On Calif. Ballot

In response to the recent appeals court decision, both Uber and Lyft have put even more support behind Proposition 22 – a California ballot measure which would exempt rideshare companies and food delivery apps from AB 5’s independent contract requirements. Nearly $200 million has been used by both companies to promote the ballot campaign.

“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,” Uber spokesperson Matt Hallman said in a statement to NPR.

According to a University of California Berkley analysis, 39% of California voters support Proposition 22. In contrast, 36% of voters have indicated they will not vote for the measure. The remaining 25% of voters are undecided, according to the analysis. The UC Berkley poll notes that voter preferences on this proposition are not as partisan and ideologically based as other ballot measures.

The Uber and Lyft Independent Contractor Lawsuits are Case Nos. A160706 and A160701 in the California Court of Appeal, First Appellate District.

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