Appeals Court Orders Uber, Lyft to Treat Drivers as Employees
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Uber Technologies Inc. and Lyft Inc. face the gravest threat yet to their business models after an appeals court ruled they must treat their drivers in California as employees instead of independent contractors.
The bombshell decision Oct. 22 comes less than two weeks before an election in which the ride-booking companies are counting on voters to approve a ballot measure that would partially exempt them from the labor law at issue in the legal fight. If the vote doesn鈥檛 go their way, Uber and Lyft are threatening to shut down in their home state.
The ruling upheld a lower court鈥檚 order that the companies comply with Assembly Bill 5 鈥 which took effect in January 鈥 and provide drivers with the costly benefits that employee status confers.
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鈥淎lthough the business context may be relatively new, we conclude that the injunction was properly issued in accordance with enduring principles of equity,鈥 the three-judge appeals panel said in its ruling. 鈥淚t is broad in scope, no doubt, but so too is the scale of the alleged violations.鈥
Wrenching Changes
Uber and Lyft are helping bankroll Proposition 22 in the most expensive ballot-measure campaign in California history. Polls have indicated the election outcome is too close to call.
鈥淭oday鈥檚 ruling means that if the voters don鈥檛 say yes on Proposition 22, rideshare drivers will be prevented from continuing to work as independent contractors, putting hundreds of thousands of Californians out of work and likely shutting down ridesharing throughout much of the state,鈥 Uber said in a statement.
RELATED: Poll: Californians Not Sold on Treating Uber, Lyft Drivers as Indepenedent Contractors
Lyft said it was considering an appeal to the California Supreme Court.
Proposition 22, which is set for a vote Nov. 3, exempts the companies from paying for full benefits that employees currently get under California law, such as unemployment insurance and complete workers compensation, while requiring a pay guarantee for drivers鈥 time on trips, health care contributions and medical and disability coverage, among others.
The appeals court rejected the argument put forth by Uber and Lyft that the Aug. 10 injunction issued against them was 鈥渞adical鈥 or 鈥渦nprecedented.鈥
鈥楳odern Technology鈥
鈥淭hese adjectives perhaps say more about the reach of modern technology and the scale of today鈥檚 technology-driven commerce than they do about the order itself,鈥 the panel said.
The ruling was hailed by opponents of Proposition 22.
鈥淣o matter how many times Uber and Lyft break the law, Attorney General Xavier Becerra and city attorneys have had rideshare drivers鈥 backs as we demanded what the law clearly guarantees us: sick pay, unemployment insurance and workers鈥 compensation,鈥 said Uber and Lyft driver Jerome Gage.
RELATED: Uber, Lyft Win Delay on Converting Drivers to Employees
Gig Workers Rising, an organization representing some drivers, called the court鈥檚 decision a huge victory.
鈥淔irst the state Legislature, then the governor, and now the courts have all agreed that drivers are employees under state law, and Prop. 22 is nothing more than an attempt by multibillion-dollar gig companies to undo that recognition,鈥 the group said in an emailed statement.
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