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Uber and Lyft successfully won their court appeal against California’s attorney general and city attorneys from San Francisco, Los Angeles, and San Diego. The appeals court ruled to extend the order that they needed to classify their drivers as employees. But the battle in California is far from over.
California’s attorney general stated that Uber and Lyft had violated the state’s new labor law, Assembly Bill 5 (AB5), saying that these powerhouse companies are misclassifying their rideshare drivers as contractors.
Assembly Bill 5 aims to give more aid and protection to freelancers by putting a three-pronged test to check whether a worker is an independent part-timer or tagged as an employee. To be called as an independent worker, one should do work “outside the usual course of the hiring entity’s business,” “free from the control and direction of the hiring entity,” and be “customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”
A trial court granted the state a preliminary injunction that necessitates Uber and Lyft to change their drivers’ classification as employees beginning August 21 before the court of appeals extended the stay. This injunction required Uber and Lyft to assume extra costs affiliated to employment if they were to continue to operate in California, such as payroll taxes and unemployment insurance.
Uber and Lyft said that their operations in California would have to be temporarily shut down to makeover their businesses to abide by the injunction and to rehire freelancers as employees. They would have to downsize the number of workers they could hire, create a stricter work schedule for their drivers, and raise the staff’s prices.
Lyft also stated that it would close down operations in California by Thursday at midnight when the stay on the injunction was set to run out before the appeals released its ruling. The company then reversed its decision because of the extended stay.
Officials in California defended that there is nothing in the law that states that Uber and Lyft are required to do away with flexible work for their drivers. On the other hand, the companies said it would be logistically improbable for them not to do it.
Uber and Lyft say they will stay in California using the same systems they are accustomed to. However, there are still some occurrences that could alter that.