California Wants Uber and Lyft Drivers as Employees

It seemed like a good idea at the time: the rapid growth of Uber-style “gig economy” business models ostensibly offering a win-win of worker freedom and consumer convenience. Yet, California government came to another conception of such arrangements: presumed exploitation. Hence enter AB 5 and its hardball “ABC” test for independent contractor classification, effective January 1, 2020. See, The Mystery of It All; Employed or Independent? (February 7, 2020).

In an opening attack, Uber and Postmates unsuccessfully sought to bar enforcement of the new law on the grounds it unconstitutionally singled them out. See, Roadkill; Federal Court Denies Uber Request to Stop AB5 (February 21, 2020).

On May 5, the state took the offensive in turn. The California attorney general and the city attorneys of San Francisco, Los Angeles, and San Diego have sued Uber and Lyft for • employee misclassification; • minimum wage; • overtime; • business expense reimbursement; • meal and rest breaks; • pay stubs; • sick leave; and much more.

The complaint contends rideshare drivers fail to meet any of part of the ABC independent contractor test:

• Free from the hirer’s control and direction in connection with the performance of the work.  

The complaint argues Uber and Lyft maintain control over  their drivers in a multitude of ways including dictating what passengers they can drive, what cars they can use, setting rates, determining pay, invoicing, handling driver and passenger issues, controlling routes, logging drivers off their app for the company’s own reasons, and many more.

• Performs work that is outside the usual course of the hiring entity’s business.

Using the companies’ public filings, the complaint states the companies are transportation companies selling on-demand rides to their customers and providing the drivers to supply those rides. Thus, the companies are not “mere technology companies” as they argue, but are “deeply enmeshed in the provision of transportation services.”

• Customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

The complaint claims that Uber and Lyft drivers do not have their own transportation businesses, their driving requires no special skills or training, they do not have investments in their driving beyond a vehicle and a smartphone, and more. It also argues that the limited choices drivers have, such as when to drive, do not meet the normal decision-making level of business owners.

The process shall continue. Uber and Lyft will defend vigorously (first court appearance not until October 7) while exploring all other options, including greater driver independence in their business models as well as a possible ballot initiative to repeal or revise AB 5.

The initiative process – requiring the proponent to gather signatures from a minimum 5% of the number of people who voted in the most recent election for governor within 180 days – will no doubt be challenging in our pandemic times.

Whatever the outcome of this battle of titans, the state is turning resources back to perhaps the hottest workplace issue in play before the pandemic hit. California business still engaged in decisions over worker classification are best advised to finish that work.

See also:

• Bullet Dodging Part 6, Real Estate Agent Exemptions from Stringent Limits on Independent Contractor Status (November, 2019).
• Bullet Dodging Part 5, The Referral Agency Exception to California’s Strict Independent Contractor Definition (November, 2019).
• Bullet Dodging Part 4, Building Subcontractors’ Exemption from the Strict New Limits on Who is “Independent” (October, 2019).
• Bullet Dodging Part 3, California’s “Professional Services” Exemption to Strict Independent Contractor Definition Licensed Beauticians Among the Eligible (October, 2019).
• Bullet Dodging Part 2, California’s “Business-to-Business” Exception to Strict Independent Contractor Definition (October, 2019).
• Dodging the Bullet, The Industries and Professions Not Subject to California’s New Independent Contractor Restrictions (October, 2019).

For assistance in correct classification decisions, contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin

May 22, 2020