California Sues Uber and Lyft for Misclassification of Drivers as Independent Contractors
Topics: Wage & Hour Issues
Despite the fact that California remains in the midst of a widespread shutdown due to COVID-19, this did not stop state and local officials from deciding it would be a good time to sue Uber and Lyft. Yesterday, the State of California and the Cities of San Francisco, Los Angeles, and San Diego filed a lawsuit against Uber and Lyft alleging that the companies violated California law and engaged in unfair competition by “misclassifying” its drivers as independent contractors instead of employees. The lawsuit seeks an injunction requiring the companies to treat their drivers as employees and also seeks restitution under the state’s unfair competition law. The lawsuit, which was filed in San Francisco Superior Court, is available here.
The lawsuit against Uber and Lyft is the latest in an ongoing battle between these companies (and other app-based driver and delivery businesses) and the State of California over the independent contractor/employee classification issue. Last year, California enacted AB 5, which codified a California Supreme Court decision in a case called Dynamex Operations West v. Superior Court and effectively rewrote the test for independent contractor status in California. The rewritten test effectively eliminates independent contractor status for most workers, except for numerous categories the legislature saw fit to exempt due to successful lobbying efforts by various employer groups. The “exempted” categories do not include Uber or Lyft drivers. Uber (along with Postmates) filed a lawsuit against the State of California late last year seeking to invalidate AB 5 on the ground that it is unconstitutional. Uber and Postmates sought a preliminary injunction against its enforcement, but the judge assigned to the case denied the motion, finding that Uber and Postmates had failed to prove a likelihood of success on the merits. An appeal of that ruling is pending before the Ninth Circuit.
Meanwhile, Uber, Lyft and DoorDash have been in the process of securing signatures for a November 2020 ballot initiative to override AB 5 and declare that drivers and certain other workers for these companies are independent contractors. The ballot initiative builds in certain minimum wage, maximum hours, expense reimbursement, and health care subsidy provisions as well. The companies have secured far more signatures than are needed to qualify for the ballot.
Clearly, the State’s latest attack against Uber and Lyft is designed to thwart the ballot initiative and force Uber and Lyft to reclassify their drivers as employees. California (and the few cities who chose to join in the lawsuit) seems intent on running Uber and Lyft out of California. I suspect voters would not that like result.