Uber, Lyft Ordered To Classify California Drivers As Employees

A California appeals court on Thursday unanimously ruled against ride-hailing companies Uber Technologies and Lyft, in a decision that could have far reaching consequences for the gig economy.

The case began earlier this year when California implemented a law (known as AB5), which sought to reclassify ride-hail, food delivery and other app-based workers as employees entitled to benefits such as unemployment insurance and minimum wage.

Officials in California sued Uber and Lyft in May for not complying with AB5. In August the San Francisco Superior Court ruled that drivers for Uber and Lyft were employees, and not freelancers or contractors.

Appeals ruling

Almost immediately after that ruling, Uber CEO Dara Khosrowshahi threatened to temporarily shut down Uber’s service in California.

The CEO of Lyft issued a similar warning.

Days later however, both Uber and Lyft were granted an emergency injunction by a court, so were able to continue operating as normal in California.

That injunction meant that drivers could continue working as independent contractors while the appeals court considered the question of driver status.

But now the Appeal Court has ruled that the ride-hailing firms must reclassify their drivers in California as employees, Reuters reported.

The judges said in a 74-page ruling that Uber’s and Lyft’s misclassification caused irreparable harm to drivers who as independent contractors miss out on employee benefits.

Remedying those harms more strongly served the public interest than “protecting Uber, Lyft, their shareholders, and all of those who have come to rely on the advantages of online ride-sharing,” the ruling reportedly said.

Lyft and Uber were quoted by Reuters as saying in a statement said they were considering all legal options, including an appeal.

“This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22,” Lyft said.

Ballot vote

This is in reference to yet another wrinkle to this story, in that California is also holding a 3 November ballot to repeal AB5, which will allow all California voters to decide about the rights of workers in the gig economy.

Some Uber and Lyft drivers are supporting this ballot measure and others are opposing it.

So while this Appeals Court ruling will not take effect before the ballot vote, it will narrow the options for Uber and Lyft should the ballot vote not go their way.

“Today’s ruling means that if the voters don’t say Yes on Proposition 22, rideshare drivers will be prevented from continuing to work as independent contractors, putting hundreds of thousands of Californians out of work and likely shutting down ridesharing throughout much of the state,” Uber reportedly said.

Whatever happens next, it is going to closely watched, as California’s decision could ripple into other US states, and into other parts of the world.