San Francisco Chronicle

Judge assails ridehail giants

Bid to force Uber, Lyft to convert workers granted

- By Carolyn Said

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.”

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