The decision of the California Public Utilities Commission (CPUC), which regulates public transit companies across the state, comes six months after the entry into force of a law that makes it more difficult for companies to classify workers as entrepreneurs rather than employees. This latter designation exempts them from paying overtime, health care and workers’ compensation.
The CPUC said on Thursday that it must apply state law, determining that drivers of transport network companies (STN), the industry’s term for public transit operators, would be considered employees in the future.
“For the time being, STN drivers are presumed to be employees and the Commission must ensure that TNCs comply with the requirements applicable to employees of an entity under the jurisdiction of the Commission,” the committee said in the document here.
Companies have said in the past that their drivers are correctly classified as independent contractors, adding that the majority of them would not want to be seen as employees because they appreciate the flexibility of working on demand.
“If California regulators force carpoolers to change their business model, it would affect our ability to provide reliable and affordable services, while threatening access to this essential work on which Californians depend,” said Uber in a press release.
Uber sued in December to block the new law, known as AB5, arguing that it punished application-based businesses and was unconstitutional.
Lyft, in a statement calling the CPUC decision “flawed”, said forcing drivers to be employees would have dire economic consequences for California.
The two companies highlighted a vote initiative in November exempting them from the law, for which they, along with the food delivery platform DoorDash, earmarked $ 90 million. According to the companies ‘proposal, drivers would benefit from mileage-based subsidies, health care allowances and workers’ compensation insurance, while retaining their flexibility as entrepreneurs.
Unions strongly criticized the proposal to create a “new subclass of workers” without basic protections such as sickness benefits and unemployment insurance.
In early May, California filed its own lawsuit against Uber and Lyft, claiming that the companies had misclassified their drivers in violation of the new law.
Report by Akanksha Rana in Bengaluru, Tina Bellon in Warwick, Rhode Island; Editing by Maju Samuel, Saumyadeb Chakrabarty and Steve Orlofsky
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