A California judge has ordered Uber and Lyft to classify their drivers as employees with benefits. The preliminary injunction issued on Monday blocks the two ride-hailing giants from classifying their drivers as independent contractors in California. The companies have ten days to appeal the decision. Both Uber and Lyft plan to file an appeal immediately, The Verge reports.
In his ruling, California Superior Court Judge Ethan Schulman says the drivers do not perform work that is “outside the usual course” of the two companies’ business. “Drivers are central, not tangential, to Uber and Lyft’s entire ride-hailing business,” he added.
Uber and Lyft under pressure to alter their business models
Uber and Lyft are facing yet another legal hurdle in California, their home state. The California Labor Commissioner had recently sued the two companies for “willfully” misclassifying their drivers as independent contractors rather than employees. This deprived them of basic worker protections and wages, the lawsuit argued.
Earlier in May, California Attorney General Xavier Becerra, along with city attorneys of Los Angeles, San Francisco, and San Diego, had also sued Uber and Lyft for this business model. They argued drivers should be classified as employees under the state’s AB5 law. The law, which came into effect on January 1st, determines if someone is a contractor or an employee through an “ABC test.”
By classifying drivers as independent contractors, Uber and Lyft emancipate themselves from paying their drivers a “minimum wage, overtime compensation, paid rest periods, and reimbursements for the cost of driving for the companies, including personal vehicle mileage”. They are also depriving drivers of health insurance and other workers’ benefits.
Several drivers’ groups have been long voicing against this business practice and they’re celebrating this decision. “Today’s ruling affirms what California drivers have long known to be true,” said Mike Robinson, a Lyft driver. “Workers like me have rights and Uber and Lyft must respect those rights.”
Drivers want to work independently, the companies argue
Both Uber and Lyft plan to appeal this ruling saying it conflicts with the desires of the majority of drivers. The companies argue that drivers do not want to be employees. Instead, they want to work independently as it gives them the flexibility of working as freelancers.
“When over 3 million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry during an economic depression,” an Uber spokesperson said. The company has already made several changes to its app since the AB5 law came into effect. It now allows drivers to set their own rates, a move that demonstrates the company’s classification of drivers as independent contractors.
“We’ll immediately appeal this ruling and continue to fight for their independence,” a Lyft spokesperson added. “Ultimately, we believe this issue will be decided by California voters and that they will side with drivers”. Uber and Lyft are backing a ballot measure that would allow state voters to override the AB5 law.