Uber & Lyft Can’t Treat Drivers As Contractors

August 10th, 2020: Uber and Lyft must reclassify California drivers as employees, a state court judge said Monday in a pivotal win for state enforcers and workers' advocates that means the workers will get sick leave, wage minimums and other job protections.

Superior Court Judge Ethan Schulman granted the state a preliminary injunction to make the companies reclassify their drivers as employees, saying the state has a strong argument that the workers are not independent contractors under Assembly Bill 5, which passed last year. Employees enjoy wage, safety and other workplace protections, while independent contractors generally do not.

A.B. 5 raised the bar for employers to classify workers as independent contractors by making them prove each of three things to do so, including that the workers' duties are outside the employer's regular business. Uber and Lyft stumble on this hurdle, Judge Schulman said.

"It's this simple: Defendants' drivers do not perform work that is 'outside the usual course' of their businesses," Judge Schulman said.

The judge stayed the order for 10 days to allow the companies time to appeal, as they had requested. The companies don't intend to dawdle, they said Monday.

"Drivers do not want to be employees, full stop," Lyft said. "We'll immediately appeal this ruling and continue to fight for their independence."

An Uber spokesperson said the company will file an immediate emergency appeal.

"The vast majority of drivers want to work independently, and we've already made significant changes to our app to ensure that remains the case under California law," the spokesperson said.

Monday's ruling hands workers' advocates a key victory in their yearslong fight to extend job protections to workers in the so-called gig economy. Uber, Lyft and other companies in the space have based their businesses on employing armies of independent contractors, who are excluded from most state and federal employment laws.

California Attorney General Xavier Becerra and the city attorneys for San Francisco, San Diego and Los Angeles sued Uber and Lyft in May, seeking an order to make the ride-hailing giants reclassify their drivers under A.B. 5. The law, which took effect Jan. 1, empowers state attorneys to seek injunctions making businesses comply with the law.

Judge Schulman appeared to buy the state's legal argument for treating the drivers as employees at a nearly three-hour hearing Thursday. But he struggled with the ramifications of ordering the companies to reclassify hundreds of thousands of drivers, saying he felt "a little bit like I'm being asked to jump into a body of water without really knowing how deep it is."

The judge acknowledged the gravity of his order Monday. Not only will it be costly for the companies to restructure their businesses to comply with A.B. 5; this shift "may also have an adverse effect on some of their drivers," who may no longer enjoy the flexibility they've had in the past, he said. But that does not excuse the companies from complying with the law.

"Defendants may not evade legislative mandates merely because their businesses are so large that they affect the lives of many thousands of people," Judge Schulman said.

And his concerns are lessened by the facts that "the vast majority" of drivers work casually or sporadically, and that ridership is at an all-time low during the pandemic, he said.

Judge Schulman dispensed with a handful of other pending motions Monday, including a request that he hold off from ruling while the Ninth Circuit considers Uber's constitutional challenge to A.B. 5 or wait for this fall's vote on Proposition 22, a California ballot measure that would exempt companies from A.B. 5. Such speculation does not spare the companies from the court's obligation to rule, the judge said, denying the stay.

Attorney General Becerra touted the decision Monday.

"The court has weighed in and agreed: Uber and Lyft need to put a stop to unlawful misclassification of their drivers while our litigation continues," Becerra said.

The ruling comes a few days after supporters of Proposition 22 appealed a Sacramento County Superior Court decision denying a request to change the measure's title and summary ahead of the November election.

Lyft is represented by Rohit Singla, Katherine Forster, Miriam Kim, Jeffrey Wu and Justin Raphael of Munger Tolles & Olson LLP, and Christa Anderson, Rachel Meny, R. James Slaughter, Brook Dooley, Eric MacMichael and Elizabeth McCloskey of Keker Van Nest & Peters LLP.

Uber is represented by Theodore Boutrous Jr., Theane Evangelis, Blaine Evanson and Heather Richardson of Gibson Dunn & Crutcher LLP.

California is represented by the state attorney general's office and the city attorneys for San Francisco, Los Angeles and San Diego.

The case is People of the State of California v. Uber Technologies Inc., case number CGC20584402, in the Superior Court of the State of California, County of San Francisco.