California Sues Uber, Lyft Saying They Misclassified Drivers as Independent Contractors -- Update
May 05 2020 - 3:11PM
Dow Jones News
By Sebastian Herrera and Tim Higgins
California sued Uber Technologies Inc. and Lyft Inc. for
allegedly misclassifying their drivers as independent contractors
instead of employees, a move that intensifies a battle between the
ride-hailing giants and their home state.
California, which is suing the companies under authority granted
by a new state law and under the California Competition Law, said
the decision to classify drivers as contractors has deprived them
of rights such as paid sick leave and unemployment insurance.
"We believe it's time for all workers to be treated fairly,"
California Attorney General Xavier Becerra said Tuesday. "We
believe that innovation doesn't require you to mistreat
workers."
The state, which seeks up to millions of dollars in civil
penalties and to force the companies to restore unpaid wages to
drivers, also said Uber and Lyft haven't contributed to state
payroll taxes used to fund general health-welfare programs. The
lawsuit was filed in conjunction with the city attorneys of San
Francisco, where Uber and Lyft are based, and Los Angeles and San
Diego.
Uber and Lyft have maintained that their drivers are properly
classified after the state passed the so-called gig economy law
last year and Gov. Gavin Newsom signed it. The law codified a test
companies must pass to classify their workers as independent
contractors, which enables companies to avoid costly benefits such
as health care. Uber and Lyft have said the law could take away
flexibility for drivers and force them to work pre-scheduled
shifts.
"We are looking forward to working with the Attorney General and
mayors across the state to bring all the benefits of California's
innovation economy to as many workers as possible, especially
during this time when the creation of good jobs with access to
affordable health care and other benefits is more important than
ever," a spokeswoman for Lyft said in a statement.
A spokesman for Uber said: "At a time when California's economy
is in crisis with four million people out of work, we need to make
it easier, not harder, for people to quickly start earning. We will
contest this action in court, while at the same time pushing to
raise the standard of independent work for drivers in California,
including with guaranteed minimum earnings and new benefits."
The legal battle comes as the coronavirus pandemic has raised an
unprecedented crisis for the ride-hailing companies. Ridership has
plummeted as governments have encouraged or ordered people to
shelter in homes and closed nonessential businesses in a bid to
stop the spread of Covid-19, the illness caused by the virus.
Spending on Uber and Lyft rides plunged 83% during the week of
April 20 in the U.S. compared with a year ago, according to data
from researcher Edison Trends.
Uber, in particular, has seen a greater reliance on drivers to
fuel its food-delivery business while its ride business languishes.
Uber is reportedly considering layoffs to help cut costs and has
pulled its guidance ahead of reporting first-quarter financial
results on Thursday.
Lyft last week announced it was cutting 17% of its workforce and
instituting unpaid furloughs and salary cuts for those who remain.
The company reports first-quarter results on Wednesday.
The confrontation highlights the inequities in the pandemic for
some workers on the front lines, including those making deliveries,
who have been left without a safety net including benefits such as
sick pay. A number of companies have provided paid sick leave only
in the event of a positive Covid-19 diagnosis for some workers.
Many drivers have talked about the conundrum they have: to drive
and risk getting sick, or stay home and not get paid.
San Francisco City Attorney Dennis Herrera said Tuesday that the
pandemic highlighted the risk under which drivers work.
When the economy begins to open back up again, there is likely
going to be an uptick in people who've lost employment wanting to
drive for the ride-hailing services.
Uber, Lyft and several other companies have amassed more than
$110 million to pass a November ballot initiative to exempt
themselves from the law. Uber, along with food delivery company
Postmates Inc., late last year filed a lawsuit challenging the law.
It is unclear how those plans have been affected by the impact
coronavirus is expected to have on elections and organizing.
Since it was passed last fall, the new California law has
prompted opposition from a number of industries, including health
care and trucking. Uber and Lyft have been among the most organized
opponents of the legislation.
The companies have said the law doesn't apply to their
businesses but have also warned that if they are forced to
reclassify their drivers, it could force them to hire far fewer
drivers and reduce the areas where they operate.
Although the companies have said their workers are properly
classified, they see their ballot initiative as a potential legal
shield for lawsuits. The initiative, if passed in November, would
promise benefits such as health care for drivers who work a certain
amount of hours a week but also seeks to eliminate any lawsuits in
the past year.
A group representing the companies in March said more than one
million signatures have already been collected, nearly double the
number required to qualify for the November ballot.
Write to Sebastian Herrera at Sebastian.Herrera@wsj.com and Tim
Higgins at Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
May 05, 2020 14:56 ET (18:56 GMT)
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