Judge blocks Uber, Lyft from classifying drivers as contractors

A California judge ruled that Uber and Lyft have to classify their drivers as employees, not contractors

An Uber representative said the state of California would make it more hard to enter the job market at a time when the coronavirus pandemic has caused unemployment to rise.

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The US ride-hailing firm appealed again to the UK's Supreme Court, whose decision will be binding but has not been made yet, and could take months.

A California judge on Monday granted the state's request for a preliminary injunction blocking Uber Technologies Inc UBER.N and Lyft Inc LYFT.O from classifying their drivers as independent contractors rather than employees.

In the order, Judge Schulman says the plaintiffs are likely to prevail on the argument that Uber and Lyft are violating AB 5.

The bill requires companies to categorize workers as employees if they control how workers need to do their jobs.

Uber CEO Dara Khosrowshahi has publicly acknowledged that drivers suffer from a lack of benefits, but asserts that drivers benefit from the flexibility afforded by independent contractor status. "I'm thankful to our Attorney General and city attorneys for demanding justice for the hundreds of thousands of rideshare drivers in California".

The state's lawsuit had sought the injunction to allow for enforcement of AB5 against Uber and Lyft, which argued the employment provision did not apply to their companies.

"Our state and workers shouldn't have to foot the bill when big businesses try to skip out on their responsibilities", said Becerra, California's Democratic attorney general.

Uber and Lyft chose to more or less sidestep key provisions of the law, and that brought us to today's ruling. This order is set to go into effect in ten days.

"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", said Uber spokesman Matt Kallman.

"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 representative told The Hill.

Uber said it did not anticipate any immediate disruptions because of the ruling for its more than 100,000 drivers in California. "We'll immediately appeal this ruling and continue to fight for their independence". If the companies are forced to reclassify their California drivers as employees, they would be on the hook for overtime, healthcare and other costly benefits. But Schulman said there was an "overwhelming likelihood" that the state of California would win the case.

The Guardian reports that the move came this week in response to a lawsuit filed by the state of California against Uber and Lyft in May.

Uber CEO Dara Khosrowshahi faced criticism this week after he wrote an opinion piece in the New York Times arguing that the company would love to pay its drivers more and give them all the benefits that employees have, but is unable to because of laws.

In its earnings call with investors earlier this month, Uber said its core business of picking and dropping people off has fallen almost 75%.

The law has wide-reaching implications across a number of sectors, but none more so than the ride-hailing industry. Still, its revenue remains down 30% from the same period previous year.

"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. "That's unacceptable", Herrera said. "Being properly classified as an employee doesn't change that".

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