Uber, Lyft fight injunction in gigwork case

Uber and Lyft asked a California appeals court Tuesday to reject a preliminary injunction that would force them to immediately reclassify their drivers as employees under AB5, the state’s gigwork law.

Both companies fiercely decried the preliminary injunction issued by a San Francisco Superior Court judge in August, with both saying they would pause service in California if it stood. They won a lastminute reprieve when the appellate court stayed the injunction while it considers their case.

The three judges from the First District Court of Appeals in San Francisco, who conducted Tuesday’s hearing via videoconference, appeared skeptical of the companies’ contentions that they are not in the business of transportation and therefore should not be subject to AB5.

That law says workers are employees unless they act free from a company’s control; do work not central to the company’s core business, and have independent enterprises doing that type of work. The law’s second prong is the biggest sticking point for Uber and Lyft, which maintain that it doesn’t apply to them with respect to drivers because they are technology marketplaces connecting riders and drivers.

Lyft lawyer Rohit Singla and Uber lawyer Theodore Boutrous asked the court to determine what justifications exist for a preliminary injunction so early in the case, long before it has gone to trial.

“The entire purpose of a preliminary injunction is to take care of some emergency harm until the trial court resolves the disputed issue,” Singla said. “There is no evidence” that such harm exists.

Both claimed that forcing reclassification would throw tens of thousands of drivers out of work, creating “unnecessary, irreparable harm,” as Boutrous put it.

But Matthew Goldberg, a San Francisco deputy city attorney, speaking on behalf of California and the cities of San Francisco, Los Angeles and San Diego, which sued Uber and Lyft in May to enforce AB5, said in fact drivers were suffering harm now because they were deprived of California labor code protections such as minimum wage, overtime, expense reimbursement, paid family leave, disability insurance and more.

“Misclassification is a significant factor in the erosion of the middle class and the rise of income inequality,” he said.

For instance, he said, employers have a legal obligation to reimburse employees for business expenses. Drivers incur expenses at the IRS rate of 57.5 cents per mile. Since the companies said the average driver covers 20 miles in an hour, that totals $ 11.50 in unreimbursed business expenses for each hour.

“The suggestion that it is not harmful to a driver to not get that money seems implausible to me,” he said. “The loss of wages clearly constitutes irreparable harm.”

The judges asked Uber and Lyft’s lawyers why they insist that reclassifying drivers would require them to upend their businesses, slash their workforces and impose mandatory schedules.

“Do you disagree with the people’s contention that there is nothing in AB5 that inherently requires you to schedule drivers in shifts, which seems to be the linchpin of the defense’s arguments that it will devastate the ability of hundreds of thousands of drivers to work?” asked Judge Tracie Brown.

Boutrous responded that experts concurred Uber would have to reorganize to cover costs as an employer.

Reclassification “would require Uber to completely change its business model,” he said. “Uber is not a hiring entity, it is not a transportation company. ... It is a multisided platform that allows riders and drivers to connect.”

The judges also zeroed in on the issue of drivers not being paid for the time they spend waiting for rides.

“The allegation in evidence ( is) that when not transporting passengers, they’re not being compensated, receiving less than minimum wage for time they’re working,” said Presiding Justice Stuart Pollak.

Singla replied that there was no proof that drivers make less than minimum wage, just allegations. Moreover, drivers could be using their wait time to watch TV, run errands or even complete a ride for a rival ridehailing service, he said.

Boutrous also made an attempt to throw Lyft under the bus, as it were, saying that Uber had made significant changes to comply with AB5, while Lyft had not. He cited its features for drivers to set prices within a range set by Uber and to pay a subscription fee for passenger referrals, for instance.

San Francisco Superior Court judge Ethan Schulman, who issued the preliminary injunction, “lumped Uber together with Lyft,” Boutrous said. “I do think Uber is in a very different position from Lyft because of these changes.”

Even while Lyft and Uber are battling reclassification in court, they are pouring millions into Proposition 22, a California ballot measure that would let them and other gig companies sidestep AB5, keeping their drivers and couriers as independent contractors with some wage floors and some benefits. The two ridehailing companies plus DoorDash, Instacart and Postmates, have spent more than $ 184 million on the measure.

Previously, the appellate court had asked the CEOs of both Uber and Lyft to submit sworn statements in September that they were prepared to comply with the preliminary injunction within 30 days if it were upheld and if Prop. 22 failed at the ballot. Uber CEO Dara Khosrowshahi’s statement said it has a plan without any specifics. Lyft CEO Logan Green said in his statement that Lyft has a plan that could include ceasing operations in all or some parts of California.

There is no timeline for the appeals court’s decision, but its previous ruling’s reference to Prop. 22 implies that the court may wait until after the Nov. 3 election.