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Business models for Uber, Lyft and dozens of other gig worker companies that have sprung up over the past decade are on hold after a California judge ruled that ride-sharing drivers should be classified as employees instead. as entrepreneurs.
Uber and Lyft have until Thursday to appeal the decision. The end result will likely have ripple effects far beyond California.
Failure to overturn the ruling would mean that the two companies, which are already failing to make a profit, will not be able to operate under their current business structures in a state known to set national precedents.
San Francisco Superior Court judge Ethan Schulman ruled Monday that Uber and Lyft must classify their drivers as full employees under Assembly Bill (AB) 5, a landmark law that establishes a test to determine whether workers can be classified as independent contractors.
Schulman sided with the California Attorney General Xavier Becerra
Xavier Becerra Appeals court rejects California ban on high capacity magazines Newsom says it has already received a number of submissions for Harris’ open Senate seat Uber CEO says the app will be temporarily closed in California if the new decision is confirmed MORE (D), who took legal action after the two ride-sharing giants resisted the law after it came into effect in January, arguing that their core business is technology rather than ridesharing.
Both companies have reacted aggressively to Monday’s court ruling, threatening to shut down operations in California if they were forced to provide workers with basic protections like minimum wages and the right to organize. These threats put drivers in a precarious situation.
“As deplorable as it is, it is not surprising, because now that the pandemic has pushed the vast majority of drivers into financial ruin, Uber and Lyft are ready to abandon them altogether,” Erica Mighetto, driver in the Greater Montreal area. San Francisco and a member of Rideshare Drivers United, told The Hill.
After the ruling, the two companies filed motions to extend a 10-day stay that Schulman granted to his decision to give Uber and Lyft time to file appeals. He rejected their motions, which means Thursday is still their deadline to appeal.
Legal experts say that while companies are almost certain to appeal, they are unlikely to present any new arguments when they do.
“Based on what I heard during the oral argument, I think they’re going to really go hard on this idea that it’s going to cause irreparable harm to businesses and drivers,” said Veena Dubal, associate professor at the university. of the Hastings College of the Law of California in San Francisco.
This argument was dismissed in court by Schulman, who said companies had ample time to figure out how to comply with the law.
The case will probably also depend on the rules for determining employment status. AB5 has codified a test to determine whether workers can be considered independent contractors.
The first part of the test says that the worker must be free from the control and direction of the hiring entity. Both Uber and Lyft have placed emphasis on the flexibility they offer drivers on their platforms, allowing them to choose their own times and routes.
However, researchers have raised questions on this independence, noting that drivers are closely watched and must follow strict policies. Plus, nothing about being a full employee has a requirement for hours.
Uber took some steps to resolve this part of the California codified test, such as letting drivers set their own surge rates and showing them entire trips before picking up passengers.
But these changes do not “give drivers enough control to say that they control their own destiny and that they control their own work,” said Bryant Greening, lawyer at LegalRideshare, a law firm specializing in the affairs of carpooling.
The second prong of the state test, and the most important in this case, is that the task performed by the workers must be outside the ordinary course of business of the hiring entity.
Uber and Lyft have long argued that they are technology platforms, not cheering companies. This argument is increasingly difficult to defend.
“It’s that simple,” Schulman wrote in his ruling, “the drivers of the accused are not doing work ‘outside the ordinary course’ of their business. The defendants’ insistence that their activities are “ multidimensional platforms’ ‘rather than transport companies is totally inconsistent with the legal provisions which govern their activities as transport network companies, which are defined as companies that “ engage in the transportation of people by motor vehicle for compensation. ”
The third part of the test requires the worker to participate in a type of task that has previously been established as being self-employed.
If any of the streams fail, the worker cannot be considered an independent contractor under state law.
Even though they’re supposed to file calls, Uber and Lyft have already started charting the next steps.
In addition to threatening to leave the state – a tactic frequently used by Uber as it expands across the country – the two companies have teamed up with other companies in concert to pour millions of dollars into a Prop vote measure. 22, which would exempt them from state labor laws that threaten their business models.
The voting measure would give workers in concert companies the right to certain protections, including minimum wages, car insurance and health care subsidies, but would exempt companies from the obligation to grant them employee status. full fledged.
Uber and Lyft have asked Schulman to postpone his decision until after the vote on Prop 22 to let voters decide, a plea that was quickly dismissed by the court.
Proposition 22 would establish the kind of third type of employee classification that Uber CEO Dara Khosrowshahi has long been looking for. Khosrowshahi sent a letter to the White House earlier this year asking President Trump
Donald John Trump President Trump’s brother Robert Trump dies at 71 for attending GOP convention every day: Reports Trump breaks with CDC director over potential for ‘worst fall’ amid pandemic and flu season PLUS consider legislative action on a classification of workers that could allow Uber to retain the flexibility of having independent contractors while adding some basic protections for workers. He lobbied similar pressure for new laws in a New York Times Editorial Monday.
An Uber and Lyft driver in California named John, who asked that his last name not be used for fear of reprisal, said threats from companies to leave the state also served to exert pressure on the conductors to support Prop 22.
“They fire a salvo at the bow, they basically want to scare the drivers, they want them to vote yes,” he told The Hill.
Resolving Uber and Lyft’s battles against California labor laws could have nationwide ripple effects for other businesses that depend on on-demand labor, like grocery shopping or food delivery, which increased dramatically during the coronavirus pandemic.
Dubal called the decision “possibly the most important ever taken globally” because “California is a huge market for them, and … the judge made such clear legal statements that he it wasn’t about a tech company but about transportation and they are clearly breaking the law. ”
For Mighetto, the San Francisco-area driver, forcing Uber and Lyft to choose between offering protections to workers or complying is long overdue.
“We really hope that we can put an end to Prop 22, and that Uber and Lyft come to the reality that there is no place for them unless they treat their workers fairly,” he said. she declared.
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