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A California judge has ruled against Uber and Lyft, ordering the ridesharing companies to classify its drivers as employees and not independent contractors.
After the state passed AB5, a law that broadly requires more workers to be treated as employees, California Attorney General Xavier Becerra and city attorneys sued the gig-economy companies this year. He argued they were violating the law by classifying their drivers to be independent contractors, even though AB5 went into effect at the start of 2020. Becerra went to court for an injunction immediately compelling the companies to treat their drivers differently.
Attorneys for Uber and Lyft had argued that a sweeping injunction was unnecessary and would cause broad harm. They wanted the state to hold off on the injunction request pending a lawsuit from the gig companies challenging AB5.
Of the ruling, San Francisco Superior Court Judge Ethan Schulman reportedly wrote that the status quo deprives Uber and Lyft drivers “of the panoply of basic rights to which employees are entitled under California law.” He also cautioned that “substantial public harm will result” if the state did not order the companies to change their ways.
Moreover, he also rejected the firms’ argument that the price would be unsustainable. In the 34-page ruling, Schulman wrote that though it will incur costs to restructure their businesses, they would be necessary in order for them to bring their businesses into compliance with California law.
In a statement, Becerra said he’d continue fighting “to make sure the people of California get the workplace protections they deserve.” “Our state and workers shouldn’t have to foot the bill when big businesses try to skip out on their responsibilities. We’re going to keep working to make sure Uber and Lyft play by the rules,” he added.
Independent contractors, as drivers are currently classified as, who set their own hours but are not entitled to most labor guarantees, such as state minimum wage, paid sick leave, and unemployment insurance.
However, along with other gig-economy app companies DoorDash, Instacart, and Postmates, Uber and Lyft are turning to California voters to counteract the effects of AB5. These companies are funding a ballot initiative, Proposition 22, that would allow them to continue treating workers as contractors while offering them some wage and benefit guarantees.
Instead of classifying their workers as employees, the companies are proposing granting a specific set of labor and wage policies and keeping them as independent contractors. The companies would guarantee certain benefits such as a net earnings floor, health care subsidies for some, disability benefits if injuries are sustained while driving passengers, and some protections on overtime work, rest periods, and sexual harassment.
The injunction doesn’t take effect for 10 days, which Uber and Lyft will use to file legal challenges.
However, Uber and Lyft have even more bad news coming. Schulman indicated that California is likely to win its case over Uber and Lyft misclassifying drivers, writing that the companies’ argument to the contrary “flies in the face of economic reality and common sense.”
Voters, for their part, will have to wait until November to vote on Proposition 22.