Lyft lose bid to uphold drivers’ contractor status

Uber and Lyft could have to turn drivers into employees by late January, according to a unanimous appeals court decision issued Thursday in a case about whether the ridehailing companies are subject to AB5, California’s gigwork law.

California Attorney General Xavier Becerra and the city attorneys of San Francisco, Los Angeles and San Diego sued the companies in May, saying that drivers were improperly classified as independent contractors, depriving them of the protections and benefits of employment, and giving Uber and Lyft an unfair edge over rivals. California and the cities won a preliminary injunction in August from Judge Ethan SchulUber,

“Uber and Lyft have used their muscle and clout to resist treating their drivers as workers entitled to ... paycheck and benefit protections.” Xavier Becerra, California attorney general

man that would have forced almostimmediate reclassification, but it was stayed pending the companies’ appeal.

“We conclude the trial court acted within its discretion and accordingly affirm the order as issued,” said the 74page decision from the First District Court of Appeal in San Francisco. The appeals court said its order would take effect 30 days after the formal rejection of Uber and Lyft’s appeal, which typically takes place within 61 days of the decision.

The ruling comes just days before the Nov. 3 election when Uber, Lyft and other gig companies will ask voters to permanently keep their drivers and couriers as independent contractors with some benefits and earnings guarantees. If their Proposition 22 passes, the companies are likely to argue that the new law takes precedence and ask to have the appeals court decision overturned.

Uber and Lyft both used the ruling to tout the ballot measure.

“This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22,” Lyft said in a statement.

“Today’s ruling means that if the voters don’t say Yes on Proposition 22, ( ridehail) drivers will be prevented from continuing to work as independent contractors, putting hundreds of thousands of Californians out of work and likely shutting down ( rides) throughout much of the state,” Uber said.

Both companies are considering legal options, which could include an appeal to the California Supreme Court.

“Uber and Lyft have used their muscle and clout to resist treating their drivers as workers entitled to ... paycheck and benefit protections,” Becerra said in a statement. “The courts saw right through their arguments. In the midst of a COVID health and economic crisis, what worker can afford to be denied basic protections like paid sick leave, unemployment insurance, minimum wage, or overtime? ... American taxpayers — not gig companies like Uber and Lyft — are covering the unemployment benefits that gig workers are receiving from the COVID bailout.”

San Francisco City Attorney Dennis Herrera had a similar take.

“For too long Uber and Lyft have illegally denied their drivers basic workplace protections and shifted that burden onto drivers and taxpayers,” he said in a statement. “Uber and Lyft have pocketed millions of dollars by leaving drivers in the lurch and taxpayers to foot the bill. The law is clear: Drivers can continue to have all of the flexibility they currently enjoy while getting the rights they deserve as employees.”

Uber and Lyft, like other gig companies, maintain that independent contractor status provides crucial flexibility for them and their workers. They also would face hundreds of millions of dollars in additional expenses if drivers were employees. Uber, Lyft, DoorDash, Instacart and Postmates have spent almost $ 200 million seeking to pass Prop 22.

The controversial issue has attracted widespread attention. The appeals court said it had read dozens of amicus briefs on both sides of the case.

Uber and Lyft supporters see them as emblematic of a new breed of smartphone enabled companies rewriting the rules of work, by allowing gig workers to log on and off whenever they want.

The appeals court said it recognized that the companies’ business models differ from traditional ones, but that if one “strip( s) away the use of the internet as a mode of communication with drivers,” the case resembles that of Dynamex, a conventional delivery company.

The California Supreme Court unanimously ruled in 2018 that Dynamex drivers should be classified as employees in a case that underpins the AB5 legislation.

The appeals court previously required the CEOs of both companies to provide sworn statements that they had plans to comply with the injunction within 30 days if it were upheld and Prop. 22 failed to pass. Both did so without any details — other than Lyft CEO Logan Green saying that its plan may include leaving California or curtailing service in the state.

The preliminary injunction is just that — it does not mean that the case has ultimately been decided, only that the companies must act even before a trial. But its issuance means the court believes that California and the cities are likely to prevail.