California Superior Court Judge Ethan Schulman has granted a preliminary injunction forcing Uber i and Lyft to reclassify its drivers as employees. This order is set to go into effect in 10 days.
“The Court is under no illusion that implementation of its injunction will be costly,” Judge Schulman wrote in the order. “There can be no question that in order for Defendants to comply with A.B. 5, they will have to change the nature of their business practices in significant ways, such as by hiring human resources staff to hire and manage their driver workforces.”
Given that the order won’t go into effect for another 10 days, Uber plans to file an immediate emergency appeal.
“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 told sources. “When over 3 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.”
The decision comes after Judge Schulman heard arguments in court last week. The hearing was the result of California Attorney General Xavier Becerra, along with city attorneys from Los Angeles, San Diego and San Francisco, filing a preliminary injunction in an attempt to force Uber and Lyft to comply with AB 5 and immediately stop classifying their drivers as independent contractors.
“Drivers do not want to be employees, full stop,” a Lyft i spokesperson told sources.
“We’ll immediately appeal this ruling and continue to fight for their independence. Ultimately, we believe this issue will be decided by California voters and that they will side with drivers.”
We chatted with another seasoned entrepreneurs about the topic and two common issues within this situation are:
- Independent workers willfully work and receive all of their earned income (untaxed), knowing that taxes are due, but due to their lack of financial responsibility and prowess, they find themselves owing taxes they cannot pay.
- Driver do not wish to be classified as employees.
- Driver acting unscrupulously and filing a malicious lawsuit against a former payer, after collecting all of their income and spending it.
In the order, Judge Schulman says the plaintiffs are likely to prevail on the argument that Uber and Lyft are violating AB 5.
AB 5 codifies the 2018 ruling established in Dynamex Operations West, Inc. v Superior Court of Los Angeles. In that case, the court applied the ABC test and decided Dynamex wrongfully classified its workers as independent contractors based on the presumption that “a worker who performs services for a hirer is an employee for purposes of claims for wages and benefits…”
According to the ABC test, in order for a hiring entity to legally classify a worker as an independent contractor, it must prove (A) the worker is free from the control and direction of the hiring entity, (B) performs work outside the scope of the entity’s business and (C) is regularly engaged in an “independently established trade, occupation, or business of the same nature as the work performed.”
The motion for a preliminary junction was filed as part of the suit filed in May, which asserted Uber and Lyft gain an unfair and unlawful competitive advantage by misclassifying workers as independent contractors. The suit argues Uber and Lyft are depriving workers of the right to minimum wage, overtime, access to paid sick leave, disability insurance and unemployment insurance. The lawsuit, filed in the Superior Court of San Francisco, seeks $2,500 in penalties for each violation, possibly per driver, under the California Unfair Competition Law, and another $2,500 for violations against senior citizens or people with disabilities.
“For years, workers have been organizing and speaking out against our mistreatment by billion-dollar gig companies who have refused to obey the law,” Uber driver and member of Gig Workers Rising Edan Alva said in a statement.
“It is because of the fearlessness of workers that the Attorney General has been able to argue that the mistreatment we face is so severe that justice can no longer wait. Today, the court sided with workers and not corporations. Thousands of misclassified gig workers will receive the wages, benefits, protections and employee status they are legally owed. It is abundantly clear that Uber and Lyft now must comply with the law. We are steadfast in our demand that the gig companies drop their $110 million ballot initiative, Proposition 22, and reinvest those funds into treating their workers with dignity and respect.”