S.F. judge weighs Uber, Lyft lawsuit
A San Francisco Superior Court judge appeared reluctant to immediately reclassify Uber and Lyft drivers as employees at a hearing on Thursday, but also displayed skepticism of the companies’ arguments about why their drivers should remain independent contractors in the long term.
Judge Ethan Schulman said he will rule in “days rather than weeks.” Even if he does reclassify drivers, he will consider Uber and Lyft’s requests to stay that order.
The case is an explosive one. California Attorney General Xavier Becerra and the city attorneys of San Francisco, Los Angeles and San Diego sued the two San Francisco companies in May, alleging that their drivers were misclassified under AB5, California’s gigwork law, and deprived of the rights and benefits of being employees.
At Thursday’s hearing, which was held via Zoom, the state and city attorneys were seeking an injunction to force immediate reclassification of the drivers even before the case goes to trial.
Uber and Lyft oppose the injunction and
were seeking to have the case postponed until after November when voters weigh in on Proposition 22, their $110 million ballot initiative that would keep drivers as independent contractors but give them some earnings guarantees and benefits. Another reason they’d like to postpone: Uber has a suit pending in federal court that challenges AB5’s constitutionality.
“It’s not every day that a judge is asked to issue an injunction on a preliminary basis that could potentially affect hundreds of thousands of people,” said Schulman, who seemed amenable to Uber and Lyft’s claims that an immediate injunction to reclassify drivers would be “drastic and dramatic.”
Rohit Singla of the Munger, Tolles & Olson law firm, appearing for Lyft, argued that such an injunction would be issued only in extreme cases.
“This is not an extreme case,” he said. “There is no case in California, no case anywhere, where ... a court has ordered hundreds of thousands of people to be reclassified on a preliminary injunction.”
Another concern with a sweeping injunction, Judge Schulman said, is not knowing the consequences, such as the effect on drivers’ ability to earn income.
“I feel like I’m being asked to jump into a body of water without really knowing how deep it is, how cold the water is, and what’s going to happen when I get in,” he said.
But Schulman definitely did not preclude ever issuing an injunction. He discussed the possibility of deferring it until later in the case, “perhaps after discovery, cross motions for summary judge or trial, whatever might be appropriate.”
He also appeared open to arguments from the state and cities that it might not be that hard for Lyft and Uber to switch drivers to employees.
“It’s very doable,” said Matthew Goldberg of the San Francisco City Attorney’s Office. “Both of these businesses already have very large whitecollar workforces . ... Extending this set of benefits to more workers administratively is not as difficult as they allege, (since) they already do this for thousands of workers.”
When it came to the substance of Uber and Lyft’s arguments about why ultimately they should not be subject to reclassification, the judge didn’t seem convinced.
A crucial test under AB5, which makes it harder for companies to claim that workers are independent contractors, is whether workers perform tasks central to a company’s core business. If they do, then the scale tips toward them being employees. The ridehailing companies asserted that they are not in the business of providing transportation.
Representing Uber, Theane Evangelis with Gibson Dunn likened Uber to marketplaces like the one eBay creates for buyers and sellers, and Airbnb creates for hosts and guests. She said her client is a technology company that creates an “online multisided platform to connect two sides of a market, the drivers and riders.”
But the judge wasn’t buying.
“It seems to me if you look at Uber and Lyft, they’re not in the business of maintaining an online app by itself,” Judge Schulman said. “That is the technology by which they perform their business, but their business is providing rides to people for compensation.”
Evangelis also argued that changes Uber has made in recent months such as allowing drivers to set fares and reject rides without penalty strengthen its case that it passes AB5’s test. Because of those changes, Uber wants its case to be heard separately from that of Lyft.
Schulman questioned Uber and Lyft’s requests to postpone the whole case until after Prop. 22 is decided in November.
“Is it a legitimate argument to say to me, ‘Judge, you know what, the law might change in the future, so you should just hold off and see what the voters do?’ ” he said. “That’s not my role.”