The California appeals court has ruled that Uber and Lyft must reclassify their drivers from independent contractors to employees.
The appeals court ruling affirms an earlier California court decision ordering the ride hailing companies Uber and Lyft to reclassify their drivers in the state as employees.
Earlier ruling on reclassification and the AB-5 law
In August, San Francisco Superior Court Judge Ethan Schulman ruled that Uber and Lyft should reclassify their California drivers from their current status of independent contractors to employees.
The court ruling stated: "Now, when Defendant’s ridership is at an all-time low, may be the best time (or the least worst time) for Defendants to change their business practices to conform to California law without causing widespread adverse effects on their drivers."
It came following a filing made by California Attorney General Xavier Becerra and a coalition of city attorneys in late June for a preliminary injunction to force the companies to comply with the AB-5 law of the state.
The law, which took effect on January 1, states that companies must prove workers are free from company control and perform work outside the usual course of the company’s business in order to classify workers as independent contractors rather than employees.
The injunction was part of a lawsuit filed in May, which accuses Uber and Lyft of depriving workers of protections, including a minimum wage, overtime, paid sick leave, and unemployment insurance, that would have been given to them as employees.
A ballot initiative, known as Proposition 22, has been funded by Uber, Lyft and DoorDash for $30 million each, with additional support from Instacart and Postmates. This will give the companies an exemption from the AB-5 law but the drivers will still receive some benefits.
Appeals court ruling and responses
In his decision, Associate Justice Jon Streeter wrote: "It is broad in scope, no doubt, but so too is the scale of the alleged violations." He upheld the injunction restraining the companies from classifying their drivers as independent contractors
Uber and Lyft still have 30 days to comply with California's law once the appeals process ends and it is unclear whether the companies plan to take the case to the California Supreme Court. However, Uber made a statement saying "we're considering our appeal options."
In reaction to the latest ruling, Attorney General Becerra said: "Uber and Lyft have used their muscle and clout to resist treating their drivers as workers entitled to those paycheck and benefit protections. It's time for Uber and Lyft to play by the rules."
Lyft spokesperson Julie Wood stated: "This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22."
Uber also focuses on Prop. 22 in its statement, arguing that if the measure is not passed, "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 chief executive officer (CEO) Dara Khosrowshahi pointed out that compliance to the ruling "would at a minimum require fundamental changes to Uber's platform," and that the change would "dramatically restrict" the number of drivers Uber could hire.
On the other hand, Lyft CEO Logan Green argued that "such implementation may include ceasing rideshare operations in all or some parts of California."
