Uber and Lyft Must Classify Drivers as Employees, Appeals Court Says -- Update
October 23 2020 - 12:27AM
Dow Jones News
By Preetika Rana
Uber Technologies Inc. and Lyft Inc. must comply with an order
that requires them to reclassify their drivers as employees, a
California appeals court said Thursday, siding with a lower-court
ruling from August that threatened to upend the companies' business
models.
Uber and Lyft would need to comply with the reclassification
within 30 days of a formal ruling, which could take several
weeks.
The companies, along with DoorDash Inc., Postmates Inc. and
Instacart Inc. have raised more than $189 million for a ballot
initiative on Nov. 3, asking that voters exempt them from such a
reclassification. That result would supersede any court
rulings.
Proposition 22, as the ballot is called, is the most expensive
proposition in California's history.
Thursday's opinion signals that California's judiciary is siding
with the state in a high-stakes battle involving the nation's
biggest ride-share and food-delivery companies. The state
implemented a new law on Jan. 1 aimed at getting the companies to
reclassify their drivers as employees, eligible for benefits such
as paid sick days and health insurance. Those benefits would weigh
the companies' bottom line at a time when they are already
struggling to turn a profit.
The companies have argued that their workers are correctly
classified as independent contractors even as they have raised
record money asking that voters exempt them from it.
The law itself, known as AB5, doesn't restrict flexible work.
But each company has aggressively campaigned on that point, saying
the reclassification would force drivers to work pre-scheduled
shifts. In recent weeks, for example, Uber has sent in-app
notifications to drivers saying it would only be able to hire 3 out
of 10 as employees. It has separately told riders their prices
would rise between 20% and 100%.
"These are not made up estimates," Uber Chief Executive Dara
Khosrowshahi said at a Wall Street Journal conference on
Tuesday.
In a 70-page opinion, the appellate court said some of the
arguments "sound very much like defendants are saying that they are
'too big to be enjoined.'"
"Defendants' detailed showing of their hundreds of thousands of
drivers statewide, the size and scale of their respective
operations, and the ripple effects on various third parties that
they insist will flow from the trial court's injunction" ended up
arguing against them, the appeals court said Thursday, "by
confirming the extent of the harm being inflicted by virtue of
their undisputed failure to provide the benefits of employment to
many thousands of ride-share drivers across the state."
"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," an Uber spokesman said. A Lyft
spokeswoman said: "This ruling makes it more urgent than ever for
voters to stand with drivers and vote yes on Prop. 22."
If Proposition 22 succeeds, the companies say they will
guarantee new protections to workers such as giving drivers 30
cents a mile driven to account for gas and other vehicle costs,
health-care subsidies for drivers who work 15 hours or more a week
and occupational-accident insurance coverage while on the job. But
critics say those protections fall short compared with the benefits
awarded to employees.
Uber and Lyft said they are considering appealing Thursday's
decision to California's Supreme Court.
Write to Preetika Rana at preetika.rana@wsj.com
(END) Dow Jones Newswires
October 23, 2020 00:12 ET (04:12 GMT)
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