The dubiously legal work model Uber and Lyft take advantage of has been under fire for years, but in the U.S., the epicenter of that fight has been California. Now, with the pandemic as a catalyst, that long-simmering battle has apparently spilled over in a lawsuit filed today by the state’s Attorney General, alleging widespread worker misclassification.
Uber and Lyft exist in a sort of legal limbo, even creating their own terminology—transportation network companies, or TNCs—to distance themselves from confusion over how they could be anything but cab companies. That distinction is one of the key reasons they’re able to exert the sort of control over drivers typically reserved for employers while classifying them as independent contractors. Under this status, drivers aren’t eligible for basic workplace protections, such as minimum wage, overtime pay, and healthcare.
Uber and Lyft have both made it quite clear in SEC filings: Avoiding this sort of overhead is crucial to both companies.
Unsurprisingly, an uninsured workforce forced into coming in close contact with strangers to earn a living during a pandemic has been a source of deep concern. “Sometimes it takes a pandemic to shake us into realizing what that really means and who suffers the consequences,” AG Xavier Becerra wrote in a statement. As Los Angeles City Attorney Mike Feuer put it in a livestream this afternoon, “This lawsuit couldn’t come at a more important time.”
With the stark decline in travel, generally, rideshare drivers have felt some of the worst economic impacts from the current health crisis.
Issues over the business model used by TNCs have been challenged in California long before coronavirus, however. Almost two years ago to the day, the state’s Supreme Court ruled that another company, Dynamex, had exerted undue control over its independent contractors, putting in place a stronger precedent for determining worker classification in the state. On January 1, after a contentious but fast trip through the legislature, California’s Assembly Bill 5 took effect, which essentially codified the Dynamex ruling into law, in a challenge to Uber, Lyft, and similar businesses.
While AB5 was forced to apply broadly to all sectors which use contractor labor, this lawsuit, targeted as it is against two specific defendants, is considerably more strident in its language:
Uber and Lyft cannot overcome this presumption with respect to their drivers. Uber and Lyft are traditional employers of these misclassified employees. They hire and fire them. They control which drivers have access to which possible assignments. They set driver quality standards, monitor drivers for compliance with those standards, and discipline drivers for not meeting them. They set the fares passengers can be charged and determine how much drivers are paid.
If the intention was to bring these companies to heel, it only made them double down. Uber, Lyft, and other “gig economy” companies opted to fund an astroturf campaign to repeal AB5 through a ballot measure (to be voted on this fall.) According to Feuer today, the results of that vote will have no bearing on the findings or results of this lawsuit. Uber also deployed staff on something it called “Project Luigi,” a series of changes to the app meant specifically to insulate the company against claims it was in violation of AB5.
Not only does the lawsuit claim that Uber and Lyft are breaking existing California law by misclassifying drivers and denying them basic protections, but it also points out that this scheme is also harmful to Californian taxpayers generally. “American taxpayers end up having to help carry the load that Uber and Lyft don’t want to accept,” Becerra wrote. “These companies will take the workers’ labor, but they won’t accept the worker protections.”
The lawsuit seeks up to $2,500 per violation—though it’s not clear at this time whether that will mean per driver deprived of lawful employment rights, or per trip in which that behavior took place. Considering AB5 covers at least one million workers in the state, Lyft and Uber are looking at the potential for considerable losses.
“This is a HUGE step forward for drivers in CA, for all misclassified workers, and the future of labor,” Nicole Moore, of the grassroots group Rideshare Drivers United, told Gizmodo. “Drivers have been fighting this fight on our own, and with the full force of the state behind us, and our three largest CA cities, we will win.”
A Lyft spokesperson told Gizmodo that “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.”
“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,” an Uber spokesperson wrote. “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.”
Updated to include a statement from Uber