Following the implementation of a new state law from January 1, earlier this year, the state of California in May, sued Uber and Lyft with claims that both companies were in violation of the state law.
It was argued by the state, that the drivers of the companies were deprived of the benefits they are entitled to under the law, by being classified as contractors instead of employees.
The law, known as Assembly Bill 5, or AB-5, states that company workers can only be treated as independent contractors if the workers were free from the control of the company and their work is performed outside the core business of the company. The California appeals court ruling thus makes it a must for Uber and Lyft to reclassify their drivers as employees and no more independent contractors. Such reclassification would mean a ladened shift on the companies, which have secured quite a large number of drivers by treating them, not as employees but as independent contractors, and therefore not providing them the benefits that they should be entitled to, had they been classified as employees. Such benefits as Overtime, minimum wage, unemployment insurance, and paid sick leave.
The first court ruling was made in August, in favour of the state. At the time, Uber and Lyft had threatened that if they were forced to reclassify their workers, they would shut down.
The companies were prompted by the ruling to appeal. But Jon Streeter, Associate Justice of the appellate court, in his decision, wrote that the injunction barring Uber and Lyft from classifying their drivers as independent contractors was substantial. "It is broad in scope, no doubt, but so too is the scale of the alleged violations,". In a statement after the ruling, Attorney General Xavier Becerra said, "Uber and Lyft have used their muscle and clout to resist treating their drivers as workers entitled to this paycheck and benefit protections. It's time for Uber and Lyft to play by the rules".
The change however, will not take effect immediately until 30 days once the appeals process finishes. That timing begins 61 days after jurisdiction is transferred by the appellate court back to the trial court, with assumption that the option is not challenged. As to whether or not Uber or Lyft would appeal the ruling to the Carlifonia Supreme Court, it is not certain, but a statement was noted from Uber thus, "We're considering our appeal options".
In attempt to side-step the Assembly Bill 5 law, Uber and Lyft along with DoorDash, Uber-owned Postmates, and Instacart, all delivery services that use drivers, have thrown in $188 million to Proposition 22, a California ballot initiative.
If Proposition 22 passes, there would be no compulsion to reclassify the ride-hail and delivery drivers as employees but would continue as independent contractors.
The CEOs of both companies told the California appeals court last month, that they would comply with the law, should the lower court's injunction be upheld, and Proposition 22 fails.
However, a complaint was filed last week with the United States Postal by those opposed to California's Proposition 22. The Yes side on the campaign had confirmed that it was formed as a non-profit organization under IRS section 501(c)(4), relating to social welfare organizations, but the No on 22 faulted the Yes side, alleging that the Yes on 22 is not eligible for a nonprofit postal status, and asked that USPS revoke its permit, stating that USPS erred in approving the Yes on 22 campaign.
Currently, Uber is facing a class-action lawsuit over Proposition 22, which alleged that the company is unlawfully forcing its drivers to support the ballot measure that aims at continuing with classifying workers as independent contractors and not as employees.
The suit was presented by two Uber drivers, Hector Castellanos and Benjamin Valdez, as well as Worksafe and Chinese Progressive Association, two California nonprofit organization.
They complained that Uber, through the company's driver-scheduling app has encouraged its drivers and delivery workers to support the ballot measure.
Uber spokesperson, Matt Kallman has however, discredited the allegations as false. He stated, "This is an absurd lawsuit, without merit, filed solely for press attention and without regards l for the facts. It can't distract from the truth: that the vast majority of drivers support Prop. 22, and have for months, because they know it will improve their lives and protect the way they prefer to work".