Court orders Uber, Lyft to reclassify drivers as employees in California

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Businesses will have 10 days before the order takes effect to allow an appeal, according to a copy of the decision from San Francisco Superior Court judge Ethan Schulman. Uber and Lyft currently treat their drivers like independent contractors.

Growing legal pressure to reclassify their workers in the state comes at an uncertain time for both companies. Uber (UBER) and Elevator (ELEVATOR) continue to deal with the pandemic, which has dramatically reduced demand for their core ridesharing businesses. Both companies have suffered layoffs and have long suffered significant losses.

According to the court ruling, “Now, when the defendant’s goodwill is at its lowest, may be the best (or least worst) time for the defendants to change their business practices to comply with California law without causing harm. ‘widespread negative effects on their drivers. ”

In response to the order, Lyft spokeswoman Julie Wood said, “Drivers don’t want to be employees, period.”

“We will immediately appeal this decision and continue to fight for their independence. Ultimately, we believe that this issue will be decided by California voters and they will side with the drivers, ”Wood said in a statement provided to CNN Business.Uber representatives did not immediately respond to a request for comment.

Monday’s order comes after California Attorney General Xavier Becerra and a coalition of city lawyers filed a preliminary injunction in late June to force the two rideshare companies to comply with California law known as AB -5. The injunction was part of a lawsuit filed in May that alleges companies misclassify their workers in violation of the law.

Under the law, which came into force on January 1, companies must prove that workers are free from any control of the company and perform work outside the ordinary course of business in order to classify workers. workers as independent contractors rather than as employees.

The lawsuit accuses Uber and Lyft of depriving workers of protections, including minimum wage, overtime, paid sick leave and unemployment insurance, to which they would be entitled as employees. Uber, Lyft and DoorDash each spent $ 30 million on a voting initiative, with additional support from Instacart and Postmates, which Uber recently agreed to acquire. If passed, it would exempt them from the AB-5 law, but provide drivers with certain benefits.

On Monday, the New York Times ran an op-ed by Uber CEO Dara Khosrowshahi calling on states to pass new laws requiring small-economy companies to create provident funds that would give workers money for benefits such as health insurance or paid vacation. “Uber is ready, now, to pay more to offer drivers new benefits and protections,” he wrote. “But America must change the status quo to protect all workers, not just one type of job. ”

The AB-5 law has long been viewed as a potential existential threat to many small-economy businesses like Uber and Lyft, which have grown their businesses largely by treating workers as independent contractors rather than employees. In addition to not having certain employee protections, drivers also pay their own expenses, including gasoline and vehicle maintenance.

Last week, the California labor commissioner’s office sued Uber and Lyft for wage theft by falsely classifying their on-demand workers as independent contractors instead of employees.

“The vast majority of drivers want to work independently, and we have already made significant changes to our app to ensure this remains the case under California law,” an Uber spokesperson said in a statement. release last week.. “When over 3 million Californians are out of work, our elected leaders should focus on creating jobs, not shutting down an entire industry.”

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