Jessica M. Semins  |  November 13, 2020

Category: Labor & Employment

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Uber and Lyft now subject to California Prop 22.

Following the passage of Proposition 22, a new California labor law, on Nov. 3, 2020, Uber and Lyft have requested an appeals court in California toss out an injunction requiring app-based drivers to be classified as employees since the new law effectively nullified the legal theory on which the prior determination was based.

In its Nov. 6, 2020 petition for rehearing filed in the First Appellate District in California, Uber stated that the new law, which is expected to take effect on Dec. 16, 2020, would supersede the legal grounds on which the injunction was granted, warranting a rehearing to address the legislative changes. Also referred to as the “App-Based Drivers as Contractors and Labor Policies Initiative,” Proposition 22 would allow rideshare companies to continue to classify drivers as independent contractors.

Lyft argued that the injunction is now moot, contending, “the State can no longer claim irreparable harm on public interest grounds, when the people of the State of California have spoken at the ballot box and determined that app-based drivers should be treated as independent contractors, not employees.”

Uber concurred in its petition that “[i]t would be ‘a purely academic exercise’ for the Court to decide whether the trial court erred in issuing an injunction that can never validly take effect.”

The injunction stemmed from two lawsuits commenced by the State of California against Uber and Lyft in May 2020, seeking to compel the ride-share companies to classify their workers as employees in compliance with California’s AB 5 and alleging violation of the Unfair Competition Law.

The trial court granted the state’s request for an injunction in August, which was upheld on appeal in October, two weeks before the Proposition 22 vote.

Rideshare companies such as Uber and Lyft have vigorously opposed employee classification under AB 5 since its enactment codifying the “ABC Test,” claiming that they provided services to app-based drivers, but did not employ them.

Lyft asserted in its petition, “[t]his Court should not permit the Opinion to become final when the underlying dispute—which centers on prospective injunctive relief—will become moot before jurisdiction has even been returned to the trial court.”

Uber and Lyft both argued that it makes no sense for the court to allow its October decision to become finalized on Nov. 21 and remittitur on Dec. 22 when the passage of Proposition 22 renders the underlying dispute concerning the injunction moot.

Lyft maintained in its petition, “[t]hat means that, absent rehearing, the Opinion will reflect the wrong law the moment the case is remanded to the trial court.”

Uber and Lyft now subject to California Prop 22.How Does Proposition 22 Affect Uber and Lyft Drivers?

According to the Secretary of State’s statistics, 58.5% of Californians voted in favor of Proposition 22, a measure that exempts Uber and Lyft — as well as other rideshare companies — from classifying their drivers as employees, rather than independent contractors, in most instances.

In the days leading up to the election, Proposition 22 was widely contested by labor advocacy groups and unions who claimed the “ABC Test” under California’s AB 5 offered more legal protections to app-based drivers.

Under the “ABC Test” of AB 5, workers could not be classified as independent contractors unless each of three elements were satisfied in a strict three-prong test. While the new App-Based Drivers initiative doesn’t overturn AB 5 in other industries, rideshare companies such as Uber and Lyft are exempted from compliance with the California regulation.

Proponents of the bill argued that it afforded app-based drivers the independence and flexibility they sought, while guaranteeing benefits such as minimum earnings and health care benefits for qualifying workers.

The initiative provides loss and liability protection for drivers, coverage for accident-related medical expenses, a guaranteed minimum level of compensation, as well as anti-discrimination, anti-harassment, and public safety protections.

The Uber and Lyft Cases are People of the State of California v. Uber Technologies Inc. et al., Case No. A160706, and People of the State of California v. Lyft Inc. et al., Case No. A160701, in the California Court of Appeal, First Appellate District.

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