A California state judge on Monday struck a major blow to Uber and Lyft, ruling that the ride-hailing companies are likely not exempt from a state law that defines their drivers as employees rather than contractors.
The judge found that there was an “overwhelming likelihood” that these companies have been misclassifying their drivers as contractors rather than employees based on a law that took effect January 1, 2020 and sought to clarify the difference in how workers are classified.
By classifying their drivers as independent contractors, Uber and Lyft have avoided providing drivers with state-mandated benefits such as unemployment. During the pandemic, many drivers who weren’t able to work have sought unemployment benefits but were told they did not qualify until the federal government stepped in with the Coronavirus Aid, Relief and Economic Security Act.
The ruling comes as part of a lawsuit brought just three months ago by California Attorney General Xavier Becerra along with the city attorneys from San Francisco, Los Angeles and San Diego. It accuses the companies of violating a new state law known as “AB5.” If a court ultimately rules against the companies, they could potentially owe huge penalties and substantial restitution to California drivers.
“Today’s ruling is a milestone in protecting workers and their families from exploitation by Uber and Lyft,” San Diego City Attorney Mara Elliott said in a statement sent by text message.
In the 34-page order granting the California attorney general’s motion for preliminary injunction -- finding that the rideshare companies have likely run afoul of AB5, and the 2018 California Supreme Court decision upon which it is based. In that case, known as Dynamex, that workers are assumed to be employees unless all parts of a three-part test are met. The AB5 law was drafted to enshrine this court decision into state law.
Judge Ethan Schulman of the San Francisco County Superior Court wrote that the companies’ claims that they are not transportation companies “flies in the face of economic reality and common sense.”
“To state the obvious, drivers are central, not tangential, to Uber and Lyft’s entire ride-hailing business,” he wrote.
Enforcement of this ruling will be put on hold pending a likely appeal.
This is a developing story. Please check back for updates.