By on October 23, 2020

A California appeals court unanimously ruled against ride-hailing giants Uber and Lyft on Thursday, mandating that they would indeed need to reclassify drivers operating within the state as employees.

The duo have been pushing against Assembly Bill 5, which seeks to reclassify contracted, gig-economy workers as fully fledged employees entitled to all the associated benefits, all year. California even sued Uber and Lyft in May for refusing to comply with with the order but they’ve claimed AB5 will severely hinder (if not eliminate) their ability to operate within the state and have backed a measure called Proposition 22 that would grant them special exceptions.

Prop 22 now serves as their last line of defense against making employment changes. Voters will decide its fate in November, with ride-hailing firms doing their utmost to promote the ballot measure ahead of time. But Thursday’s ruling remains a major blow and was accompanied by some rather severe condemnation, according to Reuters.

Appeals judges said in a 74-page ruling that Uber’s and Lyft’s classifications of drivers as contractors caused irreparable harm by denying them of employee benefits they should have been entitled to as full-time workers. While ride-hailing outfits often suggest drivers like the freedom that comes with contracted work, many don’t meet the legal definition and would normally be entitled to benefits. At a minimum, the companies would need to give operators more autonomy over fare pricing. But that would be at odds with their current business models  which remain unprofitable for anyone without a stock option.

From Reuters:

Remedying those harms more strongly served the public interest than “protecting Uber, Lyft, their shareholders, and all of those who have come to rely on the advantages of online ride-sharing,” the ruling said.

Lyft and Uber in a statement said they were considering all legal options, including an appeal.

“This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22,” Lyft said, referring to the Nov. 3 ballot measure, which would repeal AB5 and provide drivers with more limited benefits.

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

Uber CEO Dara Khosrowshahi previously estimated roughly 158,000 drivers would be out of work if AB5 goes through, adding that it might totally nullify the company’s ability to do business within the state. The company (along with Lyft, DoorDash and many similar services) will only have a month to comply with AB5 if Prop 22 fails to pass. Then again, they could just continue refusing to comply and trying their luck in the courts. But after the appeals ruling, that might not be a sound strategy anymore.

[Image: Jonathan Weiss/Shutterstock]

Get the latest TTAC e-Newsletter!

Recommended

30 Comments on “California Rules Uber/Lyft Must Reclassify Drivers...”


  • avatar
    Pig_Iron

    Not surprised by anything the California ruling elites do anymore. They’re actively trying to repeal the equal rights amendment of the state constitution. Soon only the well off will be able to drive.

    • 0 avatar
      FreedMike

      Wow, so their aim is to make sure that only people with tons of money can drive? That’ll sure endear them to the TENS OF MILLIONS OF REGISTERED, ELECTION-SWINGING VOTERS IN THE STATE who don’t have tons of money, won’t it?

      (Do yourself a favor before posting nonsense like this: read it back to yourself and ask yourself it makes any f**king sense.)

    • 0 avatar
      28-Cars-Later

      “Soon only the well off will be able to drive.”

      Trust the plan.

  • avatar
    -Nate

    I can imagine how the comments will break here .

    -Nate

    • 0 avatar
      FreedMike

      It’ll be the “if you don’t like how this company operates don’t work for them” argument.

      Of course, if you applied the same “logic” to a situation like “my mom is being sexually harassed by her boss and the company doesn’t care,” they’d feel differently. Mom should just slink away and find another job.

      Lenses are a funny thing to look through…

      • 0 avatar
        -Nate

        Indeed Mike .

        Reality too ~ it’s often not what you’d like but it is what it is .

        Lying about it and refusing to accept it don’t help anything .

        -Nate

      • 0 avatar
        Slocum

        The critical difference being, of course, that nobody wants to be sexually harassed, whereas very many Uber/Lyft drivers (along with all kinds of other free-lancers) DO want flexibility and don’t want scheduled shifts. AB 5 has screwed over other freelancers, too:

        “One day after Vox Media announced that it will cut hundreds of freelance writers living in California or covering California sports teams, two freelancer groups filed a lawsuit in federal court in Los Angeles”

        https://www.latimes.com/business/story/2019-12-17/freelance-journalist-ab5-lawsuit#:~:text=Under%20the%20state's%20landmark%20labor,%2D%20or%20full%2Dtime%20employee.

        The freelancers who didn’t get screwed (like truck-drivers) had the political clout to get exceptions for their industries written into the law.

        The ‘logic’ of AB 6 is apparently — ‘If you like your freelancer position, you’re clearly deluded and your ‘betters’ in legislature need to ‘help’ you by making your job illegal. You support this?

      • 0 avatar
        rpn453

        “Of course, if you applied the same “logic” to a situation like “my mom is being sexually harassed by her boss and the company doesn’t care,” they’d feel differently.”

        Would they? I wouldn’t. Why would she want to fight to work in a place like that instead of finding a better one?

        It’s likely my father would have knocked the guy out as a parting gift.

        Yeah, my lens would probably horrify you.

    • 0 avatar
      azfelix

      I haven’t been to the worker’s paradise of California recently, but if these ride share platforms are rounding up folks and pressing them into service like the British navy once did then I fully support your argument Mike.

      However conflating behavior that is illegal and which already has protections against it does not make for a valid argument.

      Rideshare drivers are almost the ultimate representation of an independent contractor. They bring their own equipment, determine their hours worked, have an expected payment system in place for the service they are performing, agree to meet the performance expectations of the platform, and choose to accept each contract separately the moment they press the “button” on the screen to accept a rider request.

      The effects across all industries of this power and money grab by government regulations will be devastating to those who thrive in the massive gig economy beyond this example. The camel is shoving its nose under the canvass and into the tent.

      • 0 avatar
        FreedMike

        Yep, it’s the “Power and money grab” argument. How, precisely?

        These guys are going to pay income taxes no matter whether they’re W2 employees or independent contractors. The companies are going to pay taxes no matter how they compensate their help. If a Uber driver makes $50,000 in adjusted gross, he’ll pay the same amount in taxes no matter whether he gets a W2 or files a Sch C. The only difference is that there’s no self employment tax for a W2 worker, but that’s federal anyway. What new money is the state after here?

        And do states not have any authority to regulate labor laws within their own borders as it stands? Last I checked, that’s nothing new. What new power are they after?

        I’m not seeing any money or power grab here…just companies that basically aren’t treating their people right. Well, when you don’t treat your people right, they tend to look for protection. It’s not rocket science.

        If this was such a spectacular deal for employees, nobody would be running to the state government looking for help, would they?

        • 0 avatar
          ktm

          Freedmike, honest, non-sarky question:

          How is the ride-sharing platforms any different than the myriad of LTL delivery companies who are logistic companies that hire third-party independent contractors?

          • 0 avatar
            FreedMike

            Good question, and I don’t know enough about “LTL delivery companies” to answer it the way you’d like me to. But I do know Uber and Lyft are pretty major employers, and I’d be willing to wager there are LOT more folks working for both companies than there are for “LTL delivery companies.”

            The large number of Uber/Lyft drivers affected is the reason why this issue is coming to the fore.

    • 0 avatar
      azfelix

      The company is giving its drivers exactly what they agreed to accept.

      Here’s one take on where money is generated for various levels of government:

      http://www.talentwave.com/what-are-the-tax-implications-of-ab5/

      The compliance costs will likely have many unforseen consequences on earnings for both the company and drivers. What this will do in terms of any overtime potential is likely to be devastating.

  • avatar
    azfelix

    The government knows what’s best for you.

    “That’s a direct order. Do it now.”

    youtu.be/4NHUMnGvWSk

  • avatar
    JGlanton

    Last time I was in San Francisco, Uber cost more than a taxi. They have a bunch of additional fees they tack on to the base price. A 1.5 mile ride is now $12-$14, was $6-7 a year ago.

    • 0 avatar
      ktm

      You are paying congestion fees due to time of day.

      Honestly, I would gladly pay Uber drivers more knowing it went to them and not the company. I take Uber for the convenience. I fire up the app and arrange a ride that is usually there in 15 minutes. You can also track where the driver is at in route to you.

      Taxis? Call 2 hours in advance and hope they arrive when scheduled.

  • avatar
    FreedMike

    Cue the “jackbooted government thug” nonsense.

    • 0 avatar
      -Nate

      @ Mike :

      OOPS ~ I thought you posted “cut”…..

      fear and ignorance are easy ways to control the citizens .

      -Nate

      • 0 avatar
        FreedMike

        I’m particularly fond of the “elect this guy and he’ll destroy the country” garbage.

        Like “I destroyed the country – vote for me” is a workable campaign slogan for any politician who wants to stay in office…of course it is…sure thing…

        Wish I could say it’s Republicans doing it. I’d say they’re doing it more often, and it probably works better with Republican voters, but Democrats are guilty as charged as well.

  • avatar
    indi500fan

    This one’s a no-brainer.

    The gig types are all non-union.

    Democrat controlled governments want unionized employees who generate dues which generate political contributions.

    • 0 avatar
      FreedMike

      If we’re making this about political parties, I’d say opposing this is a way of cutting off funding to unions, thereby de-funding the Democrats.

      It cuts both ways.

      Who knows if these drivers want to unionize? Maybe they do, maybe they don’t. But this much is for sure: if you want employees to unionize, the easiest way to make that happen is to make them feel underpaid, under-benefitted, and unsafe at work. That’ll do the trick every time. Workers who don’t feel that way generally don’t even want to unionize (example: VW’s workers in Tennessee).

      So I’d say this “employee treatment” ball has been in Uber and Lyft’s court for a long time now, and we have seen what their employees think of it. Perhaps if they were offering decent support to their workers, this wouldn’t be happening.

      So, if people want to de-fund the Democrats, the answer is simple: do what you can to make employers treat their employees like family. Good luck organizing them.

  • avatar
    Imagefont

    All these arguments about what constitutes an independent contractor. Fact is anyone could be an independent contractor. It’s just an employment classification and has little to do with the work you do. Let’s just do away with all employee provided benefits and health insurance and let everyone be independent. You work you get paid, take a day off and you’re on your own – we don’t know you anymore!
    No? Don’t like that?
    And let’s do away with all pensions. Especially lazy government employee and weeny retired military pensions with their socialist welfare systems of free healthcare. F those guys. When you leave the military – we’re done with you, we don’t know you anymore. We don’t need you sponging off the government for another 30 years, wasting money on unnecessary healthcare and nonessential hip replacements and all those drugs. Screw those guys. Thanks for your service, now move on and quit standing their with your hand out begging for free stuff like a homeless person. Get another job!

  • avatar
    Art Vandelay

    This is between the California electorate and their representatives. If they don’t like this sort of legislation, they will vote them out. The seem to be OK with it. The “go work somewhere else if you don’t like it” crowd is equally free to go live somewhere else if they don’t like it. I doubt most of them reside their anyway. They just want an artificially cheap service.

    • 0 avatar
      Daniel J

      Art

      I agree. Many are leaving. I just hope they don’t vote for the same crap that for Cali where it’s at today.

      It will be interesting to see if Uber pulls out or raises their prices to match the demand. Eventually driving for Uber might not be an option in Cali.

  • avatar
    golden2husky

    I don’t see why so many object to seeing our fellow citizens being able to make a decent living. They are ok with paying a scandalous markup in the mall, being robbed for events like weddings, funerals, and home closings but god forbid that an average guy should be treated like a human being. This idea of making people “outside contractors” and doing everything possible to deny them a decent wage is anti-American. No, scratch that. It is a disgrace.

  • avatar
    Freddie

    Recently I determined that the cheapest way to get home from the airport (about an hour away) was to rent a car and return it the next day to my neighborhood Avis location. If the new rules make Uber and Lyft even more expensive, then…what’s the point of a theoretical higher wage if there are no customers and therefore no jobs?

    Harsh reality: Driving people in your car is honest work but it’s not rocket science. Don’t expect to make a ton of money doing something anyone can do.

  • avatar
    HotPotato

    Assembly Bill 5 was a response to a problem across a wide range of industries: intentional misclassification of employees in order to avoid paying them overtime and benefits. While it did crack down on those abuses, it also had some unintended consequences.

    So the fake-taxi lobby (that’s Uber & Lyft, you perverts) put Proposition 22 on the ballot to say “AB 5 doesn’t apply to app-based vehicle services.” And then they said “hey voters, if you don’t vote for this, Uber and DoorDash and all the rest will vanish from the face of the state.”

    On the plus side, 22 offers a little better deal for drivers than they get now. The more hours they have passengers in the car, the more the company will contribute toward optional benefits. So in theory, a driver could have benefits without having to give up control of their working hours.

    On the minus side, it contains provisions that make it essentially impossible to ever change the law once passed, so if it turns out to be a bad deal for drivers — oh well, it’s locked in that way forever.

    I didn’t notice that poison pill at first, so I voted for it. In retrospect, I may have been bamboozled.

  • avatar
    brn

    Do people really drive for Lyft / Uber as a career? Every single driver I’ve known does it as a side gig to earn a few extra bucks.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • speedlaw: Tucked into the Tax Bill passed in the recent times, deductions for autos went way up, purchased through a...
  • speedlaw: Agreed. Caddy’s only path to success is to be exclusive, not selling parts bin cars with more...
  • el scotto: @Dartdude Our Federal Government, thankfully, is not like Apple computer corporation. I have an iPhone 3...
  • el scotto: @SCE to Aux; I can think of three stand-alone Cadillac dealers. Lockhart Cadillac in Greenwood and Fishers...
  • Ol Shel: You should choose a car from a company that’s never had a recall, like: Nash, Duesenberg, Datsun,...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Matthew Guy
  • Timothy Cain
  • Adam Tonge
  • Bozi Tatarevic
  • Chris Tonn
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber