Judge assails ridehail giants
Bid to force Uber, Lyft to convert workers granted
A San Francisco Superior Court judge on Monday granted California’s request for a preliminary injunction to make the state’s Uber and Lyft drivers into employees. The 34page order was scathing about the ridehailing companies’ “prolonged and brazen refusal to comply with California law,” namely AB5, the new gigwork law that makes it harder for companies to claim that workers are independent contractors.
The ruling is the biggest defeat Uber and Lyft have suffered in their quest to keep drivers as freelancers, which both companies say is key to their future. However, it is likely to have little immediate impact.
Judge Ethan Schulman stayed his injunction for 10 days. The companies will appeal it and seek a longer stay before the 10 days are up. An appeals court likely would hear their emergency motion quickly. Uber said it expects to be granted the longerterm delay and does not anticipate
any nearterm changes to its business. No matter what, it could not hire tens of thousands of drivers in a matter of days, it said.
“Drivers do not want to be employees, full stop,” Lyft said. “We’ll immediately appeal this ruling and continue to fight for their independence.”
“The vast majority of drivers want to work independently, and we’ve already made significant changes to our app to ensure that remains the case under California law,” Uber said in a statement.
California Attorney General Xavier Becerra and three city attorneys had sought to force the ridehailing companies to immediately reclassify their drivers under AB5. Becerra and the city attorneys of San Francisco, Los Angeles and San Diego sued Uber and Lyft in May, saying they were depriving drivers of the protections and benefits of employment. They sought a preliminary injunction even before the case goes to trial.
Schulman said there was an “overwhelming likelihood” that Becerra and the city attorneys would prevail on their claim that Lyft and Uber are misclassifying drivers. “Defendants’ contrary arguments lack merit,” he wrote, calling out “glaring inconsistencies” such as the companies saying that AB5 does not apply to them even as Uber filed a suit saying that AB5 had targeted it.
“Our state and workers shouldn’t have to foot the bill when big businesses try to skip out on their responsibilities,” Becerra said in a statement. “We’re going to keep working to make sure Uber and Lyft play by the rules.”
San Francisco City Attorney Dennis Herrera addressed Uber and Lyft’s contention that employment would require rigid scheduling. “There is no rule that prevents these drivers from continuing to have all of the flexibility they currently enjoy,” he said in a statement. “Being properly classified as an employee doesn’t change that.”
AB5 established an ABC test that says workers are employees unless A) they are free from a hiring entity’s control, B) perform work outside the hiring entity’s usual business, and C) have an independent business doing that kind of work.
Schulman said that Uber and Lyft flunk all three tests, scoffing at their attempts to say that they are not in the transportation business.
“It’s this simple: Defendants’ drivers do not perform work that is ‘outside the usual course’ of their business,” Schulman wrote. “Defendants’ insistence that their businesses are ‘multisided platforms’ rather than transportation companies ... flies in the face of economic reality and common sense.”
Schulman said substantial public harm would result without an injunction forcing reclassification since drivers would be deprived of minimum wage, workers’ compensation, unemployment insurance, paid sick leave and paid family leave.
Schulman acknowledged that complying with the injunction will not be inexpensive or easy. “There is no question that (Uber and Lyft) will have to change the nature of their business practices in significant ways,” he wrote.
Along with other gig companies, Uber and Lyft are pursuing a $110 million November ballot measure, Proposition 22, asking California voters to keep drivers as freelancers who are entitled to some earnings guarantees and benefits. DoorDash, Instacart and Postmates, the other Prop. 22 backers, are not named in the California lawsuit but presumably would be affected by whatever precedent it sets. (Uber has purchased Postmates in a deal that will close next year.)
“Ultimately, we believe this issue will be decided by California voters and that they will side with drivers,” Lyft said.
The companies point to surveys, such as ones by the blog The RideShare Guy, that most drivers prefer to stay freelance even while they complain about the companies’ pay and treatment of them — and even while many have stopped driving during the pandemic because of plunging ridership and their own fears of contagion.
“Sacramento politicians and special interests keep pushing these disastrous laws and lawsuits that would take away the ability of appbased drivers to choose when and how they work, even though by a 4:1 margin drivers want and need to work independently,” Jan Krueger, a retiree who drives with Lyft in Sacramento, said in a statement for the Yes on 22 campaign. “We’ll take our case to the voters to protect the ability of appbased drivers to work as independent contractors, while providing historic new benefits like an earnings guarantee, health benefits and more.”
The No on 22 campaign, which is backed by organized labor, had a rejoinder from Lyft driver Edan Alva.
“For years, workers have been organizing and speaking out against our mistreatment by billiondollar gig companies who have refused to obey the law,” Alva said. “The mistreatment we face is so severe that justice can no longer wait. Today, the court sided with workers and not corporations. Thousands of misclassified gig workers will receive the wages, benefits, protections and employee status they are legally owed. It is abundantly clear that Uber and Lyft now must comply with the law.”
Uber and Lyft want Becerra’s lawsuit postponed until after voters weigh in on Prop. 22, as well as until a federal court rules on a separate Uber lawsuit challenging AB5’s constitutionality.
Schulman flatly rejected that request.
“Defendants are not entitled to an indefinite postponement of their day of reckoning,” he wrote. “None of defendants’ pleas for further delay is persuasive.”
Uber had sought to sever its case from that of Lyft, saying that recent changes it made, such as letting drivers set fares as multiples of its base fare, strengthened its case that AB5 does not apply to it.
Schulman rejected that also. “The People’s claims against Defendants are nearly identical and considerations of judicial economy and efficiency support their resolution in a single action,” he wrote.
Uber and Lyft maintain that their independent contractor model for drivers is allowed under AB5, and that their businesses and drivers themselves depend on that flexibility. Switching drivers to employees would cost the moneylosing companies millions of dollars, which they say could result in higher prices and less availability for consumers.
The companies also say reclassification would force them to jettison most of their drivers, particularly those who work just a few hours a week.
“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,” Uber said.
California is also pursuing other ways to enforce AB5 against Uber and Lyft, such as a lawsuit filed this month by the state labor commissioner, Lilia GarcíaBrower, alleging that the two companies committed wage theft “by willfully misclassifying drivers as independent contractors instead of employees.”