California judge orders Uber and Lyft to reclassify drivers as employees

Andrew Cummings
August 13, 2020

Uber and fellow rideshare company Lyft both said they would appeal the judge's ruling, which takes effect August 20. Wedbush analysts estimate that reclassification of current drivers as employees will increase the company's labor costs by 30%. The state is Uber's and Lyft's largest USA market. This order is set to go into effect in 10 days.

Uber and Lyft had been accused of violating Assembly Bill 5 ("AB5"), a new state law requiring companies to classify workers as employees if they controlled how workers did their jobs, or the work was part of their normal business. "5, they will have to change the nature of their business practices in significant ways, such as by hiring human resources staff to hire and manage their driver workforces".

Uber and Lyft, he said, "cannot possibly" succeed in arguing drivers aren't core to their business.

Chief executive Dara Khosrowshahi, writing in The New York Times, said that the current employment system is outdated and "forces every worker to choose between being an employee with more benefits but less flexibility, or an independent contractor with more flexibility but nearly no safety net".

"We hope that today's ruling will serve as a potent reminder to California voters that Uber and Lyft are not above the law - and that they vote No on Prop 22".

"It's this simple: Defendants" drivers do not perform work that is "outside the usual course' of their business", Schulman wrote.

The rideshare rivals have maintain that most of their drivers want to remain independent even if they also are looking for benefits. "The vast majority of drivers want to work independently".

The comments from Uber's chief executive Dara Khosrowshahi to MSNBC come after a court gave Uber and rival Lyft until the middle of next week to reclassify drivers as employees instead of contract workers in compliance with a new state law. She said that the ride-hailing giant will "immediately appeal this ruling" and, in an apparent reference to a state ballot measure backed by companies that employ gig workers, "we believe this issue will be decided by California voters and that they will side with drivers".

The order could have broad implications not only for ride-hailing but the tech industry which relies on gig work to stand up massive labour forces without providing them the traditional benefits of employment.

Becerra added: "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". They've poured US$110 million into the effort, which is expected to be on the upcoming general election ballot.

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