Judge grants preliminary injunction forcing Uber and Lyft to stop classifying drivers as contractors

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A California judge on Monday granted a preliminary injunction requiring Uber and Lyft to stop classifying their drivers as independent contractors pending further court actions. The order will take effect after 10 days, as the companies requested a brief stay during the appeal review process.California Attorney General Xavier Becerra has sought the injunction in a lawsuit he filed in May with lawyers in the city of San Francisco, Los Angeles and San Diego. The lawsuit, filed in San Francisco Superior Court, alleged that Uber and Lyft had violated new state law known as Assembly Bill 5 (AB5), which was created to classify construction workers into as full employees and guarantee benefits to their employers. Uber and Lyft were among a group of tech companies that previously opposed the bill, saying their workers have the flexibility to create their own schedules as entrepreneurs.

California officials have sought an injunction on claims of misclassification and restitution of workers and civil penalties of up to hundreds of millions of dollars.

Uber shares were down 0.8% in extended trading on Monday and Lyft shares were down 1.7%.

Representatives from the offices of Uber, Lyft and Becerra did not immediately respond to requests for comment.

Uber CEO Dara Khosrowshahi pleaded for a “third way” to classify workers in a letter to President Donald Trump in March as the first round of coronavirus relief measures were being negotiated. He argued that there should be a way for workers to get protections without sacrificing the flexibility of contract labor.

In the decision, Justice Ethan Schulman recognized the value of the flexibility offered by Uber and Lyft, writing: “The Court does not take lightly the defendants’ demonstration that a preliminary injunction may also have an adverse effect on some of their drivers, many of whom want the flexibility to continue working as they have in the past, and may have commitments that make it difficult or impossible for them to become full-time employees. ”

But Schulman wrote that Uber and Lyft’s fears that the injunction would have “far-reaching effects” had “been only exacerbated by the defendants’ prolonged and brazen refusal to comply with California law. Defendants cannot shirk legislative mandates just because their businesses are so large that they affect the lives of many thousands of people. ”

Schulman wrote that any impact of the injunction on Uber and Lyft’s businesses would likely be mitigated by the two saying that “the vast majority of their drivers work on an occasional or sporadic basis” and the pandemic of coronavirus has “significantly reduced. the request for the services of the defendants. ”

“Now, when Defendants’ passenger numbers are at an all time high, may be the best (or least worst) time for Defendants to change their business practices to comply with California law without causing widespread negative effects. on their drivers, ”Schulman wrote.

Uber and Lyft have sought to delay the decision until there is a ruling on Uber’s constitutional challenge against AB5 or until voters weigh in on a voting measure they sponsored for them. exempt from the law. The Court rejected these requests.

The decision does not end the legal battles between Uber and Lyft, however. Last week, the California labor commissioner announced lawsuits against companies alleging wage theft due to misclassification. The commission is seeking to recover wages it claims were owed to drivers currently classified as contractors. The lawsuits were filed in Alameda County Superior Court.

This story is developing. Check back for updates.

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