Uber, Lyft Ordered to Classify Drivers as Employees
11 August 2020 - 11:09AM
Dow Jones News
By Sarah E. Needleman
A California judge said Monday that ride-hailing companies Uber
Technologies Inc. and Lyft Inc. shouldn't classify their drivers as
independent contractors, citing the state's gig-worker law that
went into effect this year. The ruling is on hold until the
companies have a chance to appeal.
California sued the companies in May in California Superior
Court, saying the decision to classify drivers as contractors had
deprived them of rights such as paid sick leave and unemployment
insurance. Uber and Lyft have asserted that the law could take away
flexibility for drivers and force them to work prescheduled
shifts.
Uber and Lyft, both based in San Francisco, said they plan to
appeal.
The so-called gig-economy law was one of the most significant
challenges facing Uber and Lyft when the year began, as governments
started to demand many of the same labor protections and other
regulatory requirements that the companies avoided in devising
their business models.
The companies' woes extend beyond the ruling, with the
coronavirus pandemic having hurt their core ride-hailing
businesses. Uber reported steep declines in the first quarter, as
stay-at-home orders prompted consumers to scale back on local
travel. It posted another big loss last week. Both companies cut
costs, including staff, to try to ride out the crisis.
Uber and Lyft have argued that they are platforms that
facilitate transactions between drivers and passengers, not
transportation companies.
"Uber goes even farther," the judge said in his ruling,
"asserting that the platform itself -- the smartphone app -- is
Uber's business, and that its actual employees work in engineering,
product development, marketing and operations."
"Were this reasoning to be accepted, the rapidly expanding
majority of industries that rely heavily on technology could with
impunity deprive legions of workers of the basic protections
afforded to employees by state labor and employment laws," San
Francisco Superior Court Judge Ethan P. Schulman wrote.
The companies had asked the judge to postpone the litigation,
citing among other reasons a proposed ballot initiative for
November that would exempt them from the California law, known as
Assembly Bill 5.
"The vast majority of drivers want to work independently, and
we've already made significant changes to our app to ensure that
remains the case under California law," said Uber spokesman Noah
Edwardsen.
Earlier this year, the ride-hailing giant capped commissions on
rides across California and started testing a new feature that
allowed some drivers to set their fares in an effort to strengthen
its case that its drivers operate with some degree of
independence.
"Drivers do not want to be employees, full stop," said Lyft
spokeswoman Julie Wood. "Ultimately, we believe this issue will be
decided by California voters and that they will side with
drivers."
Lyft has said it has 325,000 drivers in California. Uber has
said it has more than 200,000.
In a May online survey drawing responses from 734 Uber and Lyft
drivers nationwide, 71% said they wanted to be independent
contractors, according to Harry Campbell, a former Uber driver and
author of the Rideshare Guy blog.
The city attorneys of San Francisco, Los Angeles and San Diego
joined the state in its lawsuit asking the court to force the
companies to reclassify drivers as employees. California also said
in its suit that Uber and Lyft haven't contributed state payroll
taxes used to fund general health welfare programs.
California Attorney General Xavier Becerra praised the
ruling.
"While this fight still has a long way to go, we're pushing
ahead to make sure the people of California get the workplace
protections they deserve," he said in a statement.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
(END) Dow Jones Newswires
August 10, 2020 20:54 ET (00:54 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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