California Sues Uber, Lyft For Classifying Drivers as Contractors

The U.S. state of California and three of its largest cities sued Tuesday ride-hailing apps Uber and Lyft, accusing them of classifying their drivers improperly as independent contractors instead of employees, evading workplace protections, and withholding worker benefits.

RELATED:
California Governor Signs Gig Economy Labor Law

“No business model should hang its success on mistreating workers and violating the law,” California Attorney General Xavier Becerra said with his city counterparts, adding that Uber and Lyft drivers lacked basic worker protections, including sick leave and overtime payment.

The suit, joined by Los Angeles, San Francisco, and San Diego, was brought under a new state law intended to protect workers in the so-called gig economy. 

The law, under the name of Assembly Bill 5, went into effect in January 2020 and has been opposed by companies including Uber, Lyft, Postmates, DoorDash and others that depend heavily on the state’s 450,000 contract workers, not full-time employees, to drive passengers or deliver food via app-based services. 

Through the contested legislation, these companies will only be allowed to considered private contractors those that are doing work that is outside the usual course of a company’s business. 

The law codifies a 2018 state supreme court ruling and applies it to a wide range of state laws. In theory, this will make many ridesharing and courier companies offer fundamental labor rights like minimum wage, overtime, and paid leave.

Uber in December sued to block the new law arguing that it punished app-based companies. Although the state’s government argues the companies’ misclassification harms workers, law-abiding businesses, taxpayers, and society more broadly.

“American taxpayers end up having to help carry the load that Uber and Lyft don’t want to accept. These companies will take the workers’ labor, but they won’t accept the worker protections,” Becerra said.

The attorney general also referred to Uber’s and Lyft’s push to include its drivers in a federal coronavirus relief bill for unemployment benefits. Those benefits are generally reserved for workers whose employers pay into the unemployment insurance system, which Uber and Lyft do not.

The COVID-19 crisis has exposed gig workers’ lack of a social safety net, with tens of thousands of them seeking sick leave and unemployment benefits after been in the frontline of the virus delivering food, driving people around, and been forced to go out despite social distancing and quarantine recommendations. 

Uber in a statement said it will contest the action in court while pushing for the implementation of its own proposal for additional driver benefits. Lyft in a statement said it would work with the attorney general and mayors, “to bring all the benefits of California’s innovation economy to as many workers as possible.”

Labor unions continue to criticize Uber accusing the company of trying to circumvent labor laws by creating a new “underclass” of workers entitled to significantly fewer benefits than traditional employees.