Uber and Lyft Get Temporary Court Reprieve From ‘Gig-Worker’ Law

Both ridehailing companies will operate as usual in California.

August 24, 2020

SAN FRANCISCO—For now, Uber and Lyft will continue doing business as usual in California after a state appeals court temporarily paused a lower-court ruling that required the companies to reclassify their drivers as employees, reported the Wall Street Journal. However, the two companies’ high-stakes legal battle against the state’s “gig-worker” law will continue.

The court’s decision followed announcements by the two ridehailing companies that they would shutter their services in California if the courts compelled them to reclassify their workers as employees. Uber and Lyft claim that reclassifying drivers as employees would lead to higher costs.

As NACS Daily reported last week, the California law requires companies to treat workers as employees rather than independent contractors if they are controlled by their employer and contribute to its usual course of business, among other things. As employees, drivers would be eligible for sick days and other benefits, issues that have become more pressing during the coronavirus pandemic. Uber and Lyft, both based in San Francisco, argue they are technology platforms that connect riders with drivers, not transportation companies, so the drivers are not part of their usual course of business.

According to Uber, it would take several months to build a framework to reclassify drivers, including a system to monitor their meals and rest breaks, and the change would require additional staff to oversee daily operations. Lyft, too, said it lacked the infrastructure necessary to upend its business “at the flip of a switch.”

The companies say that reclassifying drivers would require them to work prescheduled shifts, robbing them of flexibility, and the companies would be forced to consolidate their fleet to fewer drivers working 40 hours a week, the standard for full-time employees; reduce services in some areas; and raise prices for rides to offset the new costs associated with managing driver operations.

Bruce Schaller, a former deputy commissioner at the New York City Department of Transportation, said the companies are exaggerating the potential costs and fare increases to rally public support for their cause.

When California voters go to the polls in November, they’ll be able to decide whether to exempt Uber and Lyft from the gig-worker law. The outcome of the vote would supersede any pending litigation. California accounted for 16% of Lyft’s rides in this year’s second quarter and 9% of Uber’s gross bookings before the pandemic.