State sues Uber, Lyft over driver misclassification.
California, 3 cities say the ride-hailing firms tried to tap funds they didn’t pay into
The State of California and three cities have filed a lawsuit accusing Uber and Lyft of breaking the state’s new “gig worker” law by misclassifying their drivers as contractors instead of employees.
In announcing the suit, California Attorney General Xavier Becerra alleged that the two San Francisco ride-hailing giants are also pushing a financial burden onto taxpayers as their drivers collect unemployment benefits from funds the companies have not paid into.
Becerra, joined by city attorneys in San Francisco, Los Angeles and San Diego, on Tuesday sued the two companies for allegedly violating AB-5, which took effect Jan. 1 and requires many workers considered contractors by employers to be treated as employees with workplace benefits.
“With jobless claims skyrocketing during the
COVID-19 public health crisis, the vulnerability of Uber’s and Lyft’s drivers has become more apparent than ever,” Becerra’s office said in a news release about the lawsuit. “The companies deny that their drivers are entitled to state unemployment insurance, as well as state-mandated paid sick leave and other employee benefits. The companies are thereby shirking their obligations to their workforce and shifting the burden onto drivers and taxpayers at a time when they are most vulnerable.”
Becerra’s office further alleged that “Uber and Lyft gain an unfair and unlawful competitive advantage by inappropriately classifying massive numbers of California drivers” and avoiding “hundreds of millions of dollars in social safety net obligations, skipping out on contributing to state payroll taxes that are used to fund general health and welfare programs that benefit all Californians.”
Neither Uber nor Lyft answered questions about whether they were pushing a financial burden onto taxpayers. But Uber vowed to fight the suit. “At a time when California’s economy is in crisis with four million people out of work, we need to make it easier, not harder, for people to quickly start earning,” Uber said in a statement. “We will contest this action in court, while at the same time pushing to raise the standard of independent work for drivers in California, including with guaranteed minimum earnings and new benefits.”
Lyft said in a statement that it was “looking forward to working with the Attorney General and mayors across the state to bring all the benefits of California’s innovation economy to as many workers as possible, especially during this time when the creation of good jobs with access to affordable healthcare and other benefits is more important than ever.”
Lyft and Uber have each put at least $30 million into a campaign to bring a ballot initiative to California voters this year that would exempt them from AB-5. Uber in December sued the state over the law, claiming that “app-based independent service providers and the companies that operate the platforms they use have a constitutional right to pursue the occupation of their choice — not to be forced to be employees when they are independent, or to be forced to be taxi or delivery companies when they are technology companies.”
Harry Campbell, who publishes a blog and newsletter followed by tens of thousands of ride-hailing drivers, estimates there are 400,000 to 500,000 Uber and Lyft drivers in California.
Becerra and the three cities allege the companies “have exploited hundreds of thousands of California workers” and evaded the state’s workplace standards. Specifically, they allege the firms are failing to pay overtime and minimum wages to drivers, failing to provide paid sick leave and rest or meal breaks, remit state income tax for drivers, provide workers’ compensation for drivers, or pay taxes for unemployment insurance and disability insurance.
The suit, filed in San Francisco County Superior Court, seeks an order forcing the two companies to stop classifying their drivers as contractors, plus up to $2,500 for each violation of the California Unfair Competition Law and up to another $2,500 for violations of other state laws laws.
“Uber and Lyft are traditional employers of these misclassified employees,” the suit alleges. “They hire and fire them. They control which drivers have access to which possible assignments. They set driver quality standards, monitor drivers for compliance with those standards, and discipline drivers for not meeting them. They set the fares passengers can be charged and determine how much drivers are paid.” That the companies communicate with drivers by app, the suit noted, does not strip the workers of their rights as employees.
The California Employment Development Department, asked whether it or any other state agency would seek money from Uber and Lyft because the firms haven’t been paying into unemployment funds and drivers are receiving unemployment benefits, said it couldn’t discuss the matter because “employee/ contractor information and tax contribution details are considered confidential” under state law.
A group called We Drive Progress, which says it’s part of a coalition of 20,000 app-based drivers in California, applauded the filing of the suit. “When I was in an accident driving for Lyft, I needed shoulder surgery and couldn’t work for eight months,” said Hector Castellanos, a Bay Area driver and We Drive Progress leader. “Without employee benefits like workers’ compensation, my daughter had to drop out of school to help us keep our home. Now that I’m quarantined because of COVID-19, it’s been the same struggle for my family all over again.”
An opposing drivers’ group, funded by Uber and Lyft, issued a statement attacking the lawsuit, saying it threatens to eliminate ride-sharing and delivery services. “I’m making the choice to work rideshare because it fits my life, and taking away my ability to choose to work as an independent contractor threatens the income that I rely on,” a Los Angeles driver named Jack Kinney said in the statement, adding that he arranges his schedule to spend time with his grandchildren.