End Of The Road For ‘Misclassification’ of Workers by Lyft and Uber?

California Attorney General Xavier Becerra filed a motion Wednesday to enjoin Uber and Lyft from continuing to classify ride-hailing drivers as independent contractors rather than employees.

The motion, filed in San Francisco Superior Court, follows the 2019 passage of Assembly Bill 5 (AB5), a law codifying a landmark California Supreme Court ruling that places the burden on employers to show they are properly classifying workers as independent contractors rather than employees.  

In Dynamex Operations West, Inc. v. Superior Court, California’s high court said most workers should be classified as employees and receive sick leave and unemployment and workers’ compensation. 

Though AB5 went into effect on Jan. 1, Lyft and Uber continue to classify their drivers as independent contractors, while pocketing the cost of employee benefits. 

Along with several other app-coordinated services,  Uber and Lyft are furiously promoting a ballot measure for the November election to exempt gig workers from the AB5 rules.

The AG’s motion asks the court to issue a preliminary injunction to stop Uber and Lyft from continuing “to violate the law despite the unambiguous directives of Assembly Bill 5.”  It alleges the illegal action of Uber and Lyft “forces law-abiding businesses to compete on an un-level playing field, and leaves the public to foot the bill for the ill-effects of Defendants’ actions.” 

In addition to failing to provide employee benefits, Uber and Lyft do not reimburse drivers for their expenses, including the cost of a smart phone and maintaining their vehicles. 

Employee v. Independent Contractor

Under California law, a worker must be classified as an employee unless the hiring entity can show: 

  1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work;
  2. The worker performs work that is outside the usual course of the hiring entity’s business, and;
  3. The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

The Attorney General’s motion argues that neither Uber and Lyft can satisfy any part of the above test.

Before 2004, Dynamex, which offered food delivery services, classified all of its California drivers as employees and compensated them in accordance with California’s wage and hour laws. At that point,  Dynamex began classifying its drivers as independent contractors to achieve cost savings 

As of March 30, 2020, Uber reported $9.0 billion in unrestricted cash, cash equivalents, and short-term investments, and Lyft reported $2.7 billion in the same categories.

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