On Monday, California Superior Court Judge Ethan P Shulman ruled that Uber and Lyft must classify their drivers as full employees and not as independent contractors. The recent ruling was a huge upset for the ride sharing companies, as Uber and Lyft have come to rely heavily on classifying their drivers as independent contractors.
The origins of this current argument between California and the ride sharing companies originates from last year’s landmark passing of the Assembly Bill 5 (AB5), which makes certain gig workers into full employees. For Uber and Lyft this means that they would need to stop classifying their drivers as independent contractors and instead grant them the benefits given to full employees, specifically, unemployment and wage floor provisions.
However, when Uber and Lyft did not comply with the bill, a lawsuit was filed by California Attorney General Xavier Becerra, along with the city attorney’s of San Francisco, San Diego, and Los Angeles. Becerra has commented on the recent ruling going in their favor stating that “the court has weighed in and agreed: Uber and Lyft need to put a stop to unlawful misclassification of their drivers while our litigation continues. 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.”
The arguments given by Uber and Lyft, on why AB5 does not have any consequence on their drivers, has failed to convince Judge Shulman. The companies’ biggest argument was that their businesses are not a transportation service but instead a tech company. This means that they only consider those who work in tech as their full employees while those who are not part of tech as contractors. Ultimately, this argument would mean that their drivers are not a core function in their tech platform and thus can be classified as contractors.
Judge Shulman found the argument lacking stating that Uber and Lyft “cannot possibly succeed” in arguing that drivers are not core to their business. The judge continues this by sating “It’s this simple: Defendants’s drivers do not perform work that is ‘outside the usual core of their businesses.'” Moreover, the judge also hints at the larger implications this ruling has for other tech companies in California, as he writes that the “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.”
Despite their loss in the court ruling, Uber and Lyft will not have to automatically convert all their drivers into full employees. This is because the ruling will now lead to a lengthy appeal process as Uber and Lyft will continue to fight to keep their drivers as independent contractors.
Uber and Lyft have major incentives to keep their drivers from becoming employees . The biggest of all is that in order for Uber and Lyft to provide quick and low cost rides, they need to have access to a large number of drivers. Therefore, to maximize their number of drivers, the companies make drivers into contractors instead of full employees.
Uber and Lyft have placed much effort in promoting the flexible work models a driver has as an independent contractor. Both of the companies state that the majority of their drivers want to remain as independent contractors pointing at an independent but unscientific survey showing that more than 70% of 734 respondent did not want to be classified as employees. Lyft also revealed that the majority of their drivers rely on the flexibility of contract work because most only seek to be temporary drivers that at most work only 20 hours per week.
Moreover, the pandemic has also come to play a role in the arguments of both sides. Uber has reported a decline of 75% when it comes to bookings from April through June and Lyft has said that in April alone rides have also fallen by 75% . Therefore, the companies argue that to attempt to make all their drivers into employees right now would lead to a huge economic burden on them and result in their app being less user-friendly and much more expensive for consumers. Yet, Judge Shulman also took the ramifications of the pandemic into account, and found in it a silver lining as he states that now, with the low ridership, is the perfect time for the companies to make changes.
Valiant Law is Southern California’s Premier Law Firm for Employment Law. Our dedicated and highly experienced attorneys can help you with a variety of legal needs. What sets us apart is not only our experience and our dedication, but also our passion for seeing our clients’ legal needs sufficiently met. Contact us today for a free consultation.