Court orders Uber and Lyft to consider drivers as employees

Uber app displayed on a car dashboard

Uber and Lyft have ten days to file an appeal against an injunction from a California court ruling which says the companies' drivers aren't contractors but employees.

The case centres on Assembly Bill 5, a law passed last year that requires companies to consider drivers or other gig workers as their own employees rather than contractors, which is a designation that should now only be used for tasks deemed outside the usual course of business.

For Uber and Lyft, driving is clearly a core part of their ride-share businesses, but they have long argued they offer a platform for workers to operate rather than directly employing drivers.

In May, a lawsuit was brought against Lyft and Uber for failing to reclassify their workers as required by the new regulation. The lawsuit was brought by LA, San Diego, San Francisco and state attorney general Xavier Becerra.

This latest ruling, by Judge Ethan Schulman, grants a request for an injunction against the companies, stopping them from classifying their workers as contractors. According to Reuters, the judge's decision said it was overwhelmingly likely that the plaintiffs could prove that classification was contrary to the new law, and said Uber and Luft and been "brazen" in their refusal to meet such laws.

"It's this simple: defendants' drivers do not perform work that is 'outside the usual course' of their business," the judge wrote in his ruling, referencing the requirements of the Assembly Bill 5 law.

"Defendants' insistence that their businesses are 'multi-sided platforms' rather than transportation companies is flatly inconsistent with the statutory provisions that govern their businesses as transportation network companies, which are defined as companies that 'engage in the transportation of persons by motor vehicle for compensation'."

The gig-economy giants disagree, and Lyft and Uber both plan to appeal. “Drivers do not want to be employees,” Lyft said in a statement sent to Reuters.

"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," an Uber spokesperson said. "When over three million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry during an economic depression."

Yesterday, the company's CEO Dara Khosrowshahi called for regulation to create driver benefit funds, claiming drivers want the flexibility of contract work. "Uber would not be as widely available to riders, and drivers would lose the flexibility they have today if they became employees," he wrote in a column for The New York Times.

Alongside an appeal, Uber and Lyft will have another chance to push back against the law classifying drivers as employees, with the benefits and protections that entails. In November, Californians will vote on Proposition 22, which would label as contractors any drivers for apps such as Uber and Lyft.

“Ultimately, we believe this issue will be decided by California voters and that they will side with drivers," the Lyft spokesperson added.