California Accuses Uber & Lyft of “Misclassifying” Drivers
In recent years, there have been a number of lawsuits aimed at determining the legal status of drivers who use ride-sharing apps to connect with customers. The two largest ride-sharing companies, Uber and Lyft, have always maintained drivers are “independent contractors” who are not entitled to any of the legal benefits of employees, such as a guaranteed minimum wage and worker’s compensation benefits. Many drivers, however, have contested this, alleging in various legal actions they are in reality employees who have been deliberately misclassified as contractors.
On May 5, the State of California and three city attorneys decided to formally enter the legal battle on the side of the drivers. Attorney General Xavier Becerra filed a lawsuit in San Francisco Superior Court alleging that both Uber and Lyft are misclassifying its drivers under California law, specifically the recently adopted Assembly Bill 5. Joining Bacerra in the lawsuit are the city attorneys for Los Angeles, San Diego, and San Francisco.
The lawsuit alleges that from the outset of their respective businesses, Uber and Lyft “made the calculated business decision to misclassify their on-demand drivers as independent contractors rather than employees.” Under California law, workers are presumed to be employees unless the “hiring entity” can prove otherwise. In this case, the Attorney General and city attorneys argue, neither company can overcome that presumption.
In a separate statement accompanying the lawsuit, Becerra cited the ongoing COVID-19 pandemic as just one more reason Uber and Lyft should start treating their drivers as employees. “Californians who drive for Uber and Lyft lack basic worker protections — from paid sick leave to the right to overtime pay … Sometimes it takes a pandemic to shake us into realizing what that really means and who suffers the consequences. Uber and Lyft drivers who contract the coronavirus or lose their job quickly realize what they’re missing.”
What Is Uber and Lyft’s “Core Business”?
Assembly Bill 5 codified into state law an earlier ruling from the California Supreme Court that established a three-part “ABC test” in worker misclassification cases. The second part of this test is likely to prove the most critical in the Attorney General’s lawsuit. Basically, there are three things that a hiring entity needs to show in order to overcome the presumption that a worker is actually an independent contractor. The second thing is that the worker provides services that are “within the usual course of” the hiring entity’s business.
Put another way, if the worker provides a service that is part of the employer’s core mission, then that worker is an employee. Here, the Attorney General argues that Uber and Lyft are “transportation companies” that sell “on-demand rides to its customers.” The drivers, in turn, provide these rides. Since the drivers perform services “within the usual course of” Uber and Lyft’s core businesses, they are properly classified as employees.
In response, Uber and Lyft will likely argue their real core business is not selling rides to customers, but rather providing a “technology platform” to connect drivers and passengers. Indeed, an attorney for Uber made that exact argument to the technology website The Verge last year.
Do You Have Questions About Your Own Work Classification?
This lawsuit is unlikely to be the last legal action filed against Uber, Lyft, and other “gig economy” companies whose business model depends on the classification of workers as independent contractors. If you are a gig worker who has questions or concerns over your own legal status, please contact a qualified California employment law attorney as soon as possible.