California sues Uber and Lyft for allegedly misclassifying drivers

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California’s Assembly Bill 5 was designed to confront the ridesharing industry over its treatment of drivers,and now that confrontation is officially underway. State Attorney General Xavier Becerra and City Attorneys for Los Angeles,San Diego and San Francisco have sued (via New York Times) Uber and Lyft for allegedly misclassifying drivers as contractors instead of employees. The complaint asks for a “permanent halt” to the practice,restitution for drivers and penalties that could amount to “hundreds of millions of dollars.”

Becerra used the COVID-19 pandemic as an example of just why the plaintiffs thought the lawsuit was necessary. Drivers don’t get standard paid sick leave,overtime pay or unemployment insurance,the Attorney General said,forcing taxpayers to “carry the load that Uber and Lyft don’t want to accept.”

The companies have promised to compensate drivers either infected by COVID-19 or quarantined by health officials out of precaution,but their strategies are exceptions that don’t cover separate health issues or other costs. They also don’t account for payroll taxes.

A Lyft spokesperson told Engadget the company was “looking forward” to working with the Attorney General and mayors on bringing the “benefits” of gig economy companies to Californians. It’s not directly indicating how it will respond to the lawsuit,then. Uber was more vocal in its opposition,saying it would “contest” the lawsuit and claimed this would make it “harder” for people to start driving. You can read the full statements below.

In the past,Uber and Lyft have fought bitterly against AB5 and other attempts to treat their drivers as employees. They’ve insisted that their contractor approach is necessary to provide flexibility and have argued for an in-between option that lets them keep drivers as contractors but theoretically offers more of a safety net. Uber has gone so far as to preemptively sue the state. The attorneys don’t buy the argument,however. San Francisco City Attorney Dennis Herrera said the companies were “selling a lie,” and that it was entirely possible for drivers to choose their own hours and areas while receiving employee benefits. Uber and Lyft “simply don’t want to do it,” Herrera added.

It’s far too soon to say how the lawsuit will pan out. There’s little doubt that it comes at a difficult moment for Uber and Lyft,though. Both companies are reeling from the pandemic due to a plunge in ridership,leading Uber to pull its Eats service out of several countries and Lyft to lay off nearly 1,000 people. They could find themselves paying considerably more to support California drivers if government attorneys succeed. At the same time,there’s little doubt that the new coronavirus has highlighted the lack of protections for gig economy workers of all kinds — they have few options if something goes awry.

"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." Uber "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 healthcare and other benefits is more important than ever." Lyft