The Future Is Here
We may earn a commission from links on this page

Uber and Lyft Lose Big In California Appeals Court

We may earn a commission from links on this page.
Image for article titled Uber and Lyft Lose Big In California Appeals Court
Photo: Frederic J. Brown (Getty Images)

As Uber and Lyft blast millions of dollars and countless dishonest voter guides behind their looming ballot measure, a California appeals court has affirmed that the companies have to follow the very state labor law their ballot measure is design to repeal.

In a 74-page decision, Associate Justice Jon Streeter wrote that Uber and Lyft’s self-characterization as platforms that merely provide the tech for workers to do their own unrelated business “presents an artificial choice.” “What the argument masks,” Justice Streeter wrote, “is that drivers’ services may be rendered both to the hirer and to a third party, benefiting each one.”


The law in question, Assembly Bill 5 (AB 5), which passed last September, codified an early state Supreme Court ruling into law, which makes is significantly more difficult for companies to erroneously claim their workers are “independent contractors” rather than employees. Of the many firms using this designation to dodge labor costs and workplace liabilities, Uber, Lyft, and other “gig economy” companies are some of the worst offenders.

“This is a huge victory for workers,” Gig Workers Rising said in a statement shared with Gizmodo. They accused Uber and Lyft of “fear-mongering” tactics to pass their ballot measure, including previous threats to leave California if AB 5 stands.


It’s not the first time Uber and Lyft have used the bullying tactic: Uber has made the same threat in Maryland over background checks (which were never implemented), and Uber and Lyft pulled out of Austin, Texas for a year after the city instated background checks (which the state overturned).

If you haven’t heard of Prop 22, this is Uber, Lyft, DoorDash, and other gig companies’ bid to pass their own dream ballot measure which would allow them to permanently circumvent hard-fought labor legislation and continue classifying workers as “independent contractors.” That designation means that workers aren’t entitled to hourly minimum wage, overtime, full benefits, OSHA protections, recourse for sexual harassment and discrimination, unemployment insurance, or compensation for work-related costs like gas. Under Prop 22, the companies get to continue classifying workers as independent contractors while implementing their own selective benefits, including a wage floor for “engaged time” (time spent picking up and dropping off customers), a portion of healthcare subsidies, accident insurance, and accidental death insurance for drivers while using the app. Among other things, this means that nobody gets paid for time spent waiting for rides.

If passed by voters, Prop 22 is effectively immutable. Ballot measures require a ⅞ majority vote in both houses of the state legislature to change. Advocates often point out that this makes alterations near-impossible, given that latest contributors to Uber, Lyft, and DoorDash’s Yes on 22 campaign include the Republican parties of Sacramento County and San Diego County.

In a statement to Gizmodo, an Uber spokesperson parroted the argument, which they’ve been making since the dawn of time. “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,” they said. “We’re considering our appeal options, but the stakes couldn’t be higher for drivers—72% of whom support Prop 22—and for the California economy, where millions of people are jobless and another 158,000 just sought unemployment support this week.”


The decision on the court of appeals, however, tells a very different story: “The trial court found that rectifying the various forms of irreparable harm shown by the People more strongly serves the public interest than protecting Uber, Lyft, their shareholders, and all of those who have come to rely on online ride-sharing delivered by a business model that does not provide employment benefits to drivers,” the decision reads. The ruling notes that 305,000 people drove for Lyft last year and 311,000 for Uber. In other words, enforcing the law does more good than shielding these companies from consequence.

The pandemic put the harm that Uber and Lyft’s drivers are exposed to in stark contrast. Drivers had to fight for months to receive unemployment benefits, which effectively came from taxpayers. Researchers at the UC Berkeley Labor Center, who’ve extensively studied Uber and Lyft’s models, estimate that had Uber and Lyft paid into unemployment insurance between 2014 and 2019, they would have chipped in $413 million to California alone. Because of their reliance on “independent contractor” status for drivers, they didn’t. Instead now, the companies, along with DoorDash and others, have now pumped over $189 million toward passing Prop 22. (The company’s aggressive PR push to pass Prop 22 not only externally, but in their respective apps, led drivers to sue both Uber and Lyft yesterday—though the suit’s value may be more symbolic than legal.)


Uber and Lyft still have time to file an appeal, and a stay will remain in place for 30 days after the filing, giving them plenty of time to stall. Lyft told Gizmodo that they are considering all legal avenues, including an appeal to the California Supreme Court.

Correction 10/23/2020, 12:39 a.m. ET: A previous version inaccurately stated that yesterday’s decision was written Judge Ethan Schulman. The decision was written by Associate Justice Jon Streeter. Judge Schulman had presided over the case at the trial level.


Read the full decision here: