Uber seeks split from Lyft in suit over AB5
Rival ridehailing companies Uber and Lyft united to fight AB5, California’s gigwork law that could force them to turn their drivers into employees. Now Uber wants to go its own way in its legal battle with California, which sued both companies in May to challenge their classification of drivers as independent contractors.
In court documents filed Wednesday, Uber says its case should be separated from Lyft’s because Uber has changed how it does business, including letting drivers set their own fares. Uber argued that those changes mean its drivers are truly independent.
“Uber and Lyft are fundamentally different companies with different business models,” Uber said in a filing in San Francisco Superior Court, noting there are no allegations that it acted in concert with Lyft. “Many of the general allegations asserted against both Uber and Lyft are simply false as to Uber.” The rival compa
nies are both headquartered in San Francisco.
California Attorney General Xavier Becerra, along with the city attorneys of San Francisco, Los Angeles and San Diego, sued Uber and Lyft in May, saying they had misclassified drivers and deprived them of crucial labor rights and benefits. The government officials say the companies should pay hundreds of millions in back wages and civil penalties.
“Having the cases heard separately doesn’t impact us,” Lyft spokeswoman Julie Wood said. “We have all said from the beginning that there is no ‘onesizefitsall’ when it comes to software platforms or business models in the (ridehailing and delivery) world.”
Becerra’s office said it would not comment until it reviews the new filings.
“This is yet another desperate attempt by Uber to avoid treating its drivers fairly and following the law,” said John Coté, spokesman for San Francisco City Attorney Dennis Herrera.
Separately on Wednesday, Uber and Lyft are filing to seek to postpone the case until after the November election, when California voters will weigh in on Proposition 22. Uber, Lyft and other gig companies have spent over $110 million on the measure to exempt themselves from AB5.
Uber also wants Becerra’s case delayed until federal courts rule on a separate lawsuit Uber and Postmates filed in December challenging AB5’s constitutionality and until California courts rule on earlier misclassification cases filed by drivers.
“We’re asking the court to press pause so we can see how these other lawsuits and the ballot initiative plays out,” Theane Evangelis, a partner at Gibson, Dunn & Crutcher, Uber’s law firm, said in an interview.
Both Uber and Lyft fiercely resist the idea that drivers should be employees, saying both the companies and drivers rely on the flexibility of independent contractors. Switching to employment could cost the moneylosing companies hundreds of millions of dollars in overtime, benefits and other expenses.
In Wednesday’s filing, Uber cited a change it implemented throughout California last week allowing drivers to set fares as multiples of Uber’s base fares, a change it made in January to show drivers a rider’s destination and allowing riders to “favorite” drivers to be matched with them in the future.
Uber’s filing said it does not pay drivers as an employer would; instead drivers pay it a percentage of their fares plus what Uber calls a marketplace fee for drumming up riders and processing payments. Drivers can pay either a subscription fee or a flat fee, it said. (The amounts are set by Uber and drivers have no ability to negotiate them, however, a point Uber did not make.)
“We should not be lumped together (with Lyft) in this suit,” Evangelis said. “Uber has made a wide variety of changes over the last six months ... that we think strengthen the independence of drivers.”
Uber’s filing also reveals some of its legal strategy. It says the Becerra lawsuit makes overly broad allegations, lacking specifics on how it violated any laws and how any individual drivers were harmed. It says employees must work at least some thresholds of hours to be entitled to benefits, and the case doesn’t address whether its drivers meet these minimums.
Becerra and the city attorneys are seeking a preliminary injunction forcing Uber and Lyft to reclassify drivers even before the case is heard. The hearing on that motion is scheduled for Aug. 6.
After years of competition, which included trash talk and even dirty tricks, Uber and Lyft appeared to forge a truce a year ago, with both seeing AB5 as a major threat to their businesses.
Their top executives — Uber CEO Dara Khosrowshahi, Lyft CEO Logan Green and Lyft President John Zimmer — jointly wrote an opinion piece in The Chronicle offering to make changes for their California drivers if they could keep them as independent contractors. They each put up $30 million to push Proposition 22. (Another $30 million came from DoorDash, along with $10 million each from Instacart and Postmates, which recently agreed to sell itself to Uber.)
AB5 makes it harder for companies to claim that workers are independent contractors rather than employees. Massachusetts has long used a similar test as implemented in AB5, but had not enforced it against Uber and Lyft until Tuesday, when it filed a lawsuit similar to Becerra’s.