California Rules Uber/Lyft Must Reclassify Drivers

Matt Posky
by Matt Posky
california rules uber lyft must reclassify drivers

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]

Comments
Join the conversation
2 of 30 comments
  • HotPotato HotPotato on Oct 24, 2020

    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.

  • Brn Brn on Oct 25, 2020

    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.

  • Laszlo I own a 1969 falcon futura 4 door hardtop, original inline 6 and c4 transmission and it still runs to this day.
  • BklynPete So let's get this straight: Ford hyped up the Bronco for 3 years, yet couldn't launch it to match the crazy initial demand. They released it with numerous QC issues, made hay for its greedy dealers, and burned customers in the process. After all that, they lose money on warranties. The vehicles turn out to be a worse ownership experience than the Jeep Wrangler, which hasn't been a paragon of reliability for 50 years. The same was true of the Aviator, Explorer, several F-150 variants, and other recent product launches. The Maverick is the only thing they got right. Yet this company that's been at it for 120 years. Just Brilliant. Jim Farley's non-PR speak: "You don't get to call me an idiot. I get to call myself an idiot first."Farley truly seems hapless, like the characters his late cousin played. Bill Ford is a nice guy but more than a bit slow on the uptake too. They have not had anything resembling a quality CEO since Alan Mulally turned the keys over to Mark Fields - the mulleted glamor boy who got canned after 3 years when the PowerShi(f)t transaxles exploded. He more recently helped run Hertz into the ground with bad QC and a faulty database that had them arresting customers. Ford is starting to resemble Chrysler in the mid-Seventies Sales Bank era. Well, at least VW has cash and envies Ford's distribution reach and potential profitability.
  • Mike Beranek This guy called and wants his business model back.
  • SCE to AUX The solid state battery is vaporware.As for software-limited pack capacity: Batteries are obviously the most expensive component of an EV, so on the rare occasion that pack capacity is dramatically limited (as in your 6-year-old example), it's because economies of scale briefly made sense at the time.Mfrs are not in the habit of overbuilding pack capacity just for fun, and then charging the customer less.Since then, pack capacities have been slightly increased via software because the mfr decides they can sacrifice a little bit of the normal safety/wear margin in the interest of range. We're talking single-digit percentages, not the 60/75 kWh jump in your example.Every pack has maybe 10% margin built into it, so eating into that today (via range increases) means it's not available to make up for battery degradation tomorrow. My 4-year-old EV still has its original range(s) and 100% SOH, but that's surely because it is slowly consuming the margin built into the pack.@Matt Posky: Not everything is a conspiracy to get your credit card account, and the lengthy editorial about this has nothing to do with solid state batteries.
  • JLGOLDEN In order for this total newcomer to grab and hold attention in the US market, the products MUST be an exceptional value. Not many people will pay name-brand money for the pretty mystery. I can appreciate the ambition of selling $50K+ crossovers, but I think they will go farther with their $30K-$40K offerings.
Next