Uber and Lyft must pay drivers as employees under California labor law AB 5, court rules
Uber and Lyft must pay their California drivers as employees within weeks to comply with a new state labor law that directs companies to provide benefits to more workers, according to a state appeals court ruling filed Thursday.
California Attorney General and city attorneys for San Francisco, Los Angeles and San Diego sued Uber and Lyft in May, saying the companies should classify their drivers as employees rather than as independent contractors under the law known as Assembly Bill 5.
The unanimous ruling from the 1st District Court of Appeal affirms a San Francisco Superior Court judge’s preliminary injunction issued in August. Uber and Lyft had threatened to pull out of California, only to stay when the appellate court temporarily issued a stay on the preliminary injunction.
The companies have argued their drivers should be considered as independent contractors, because Uber and Lyft simply match those workers with passengers. But the court didn’t buy the argument, saying the drivers performs services for the companies in the usual course of their businesses.
“Their actions determine the relationship, not the labels they use,” the court said.
The court also noted Uber and Lyft have had ample time to comply with the law, but have yet to do so. That makes the injunction necessary, the court said. Gov. Gavin Newsom signed the law in September 2019.
“When violation of statutory workplace protections takes place on a massive scale, as alleged in this case, it causes public harm over and above the private financial interest of any given individual,” the appellate court said in its ruling.
The appellate court’s ruling, however, may be short-lived. The companies are backing an initiative, Proposition 22, to exempt themselves from the labor law. If it passes, those companies would be allowed to classify their drivers as independent contractors.
“This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22,” Lyft spokeswoman Julie Wood said.
Lyft said there is no immediate changes for drivers on its platform, and that it is considering all of its legal options, including appeal to the California Supreme Court.
“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 said in a statement. “We’re considering our appeal options, but the stakes couldn’t be higher for drivers—72% of whom support Prop 22—and for the California economy, where millions of people are jobless and another 158,000 just sought unemployment support this week.”
Attorney General Xavier Becerra celebrated the ruling.
“Californians have fought long and hard for paycheck and benefit protections. Uber and Lyft have used their muscle and clout to resist treating their drivers as workers entitled to those paycheck and benefit protections,” Becerra said in a statement. “The courts saw right through their arguments.”
In a statement, a drivers group Gig Workers Rising called the ruling a “huge victory for workers,” and urged voters to cast a ballot against Prop. 22.
“First the state legislature, then the governor, and now the courts have all agreed that drivers are employees under state law, and Prop. 22 is nothing more than an attempt by multi-billion dollar gig companies to undo that recognition,” the group said.
This story was originally published October 22, 2020 at 6:48 PM.
