Last week, a state Superior Court judge ruled that Uber and Lyft must convert all California drivers from independent-contractors to full employees in compliance with California’s Assembly Bill 5. The law, which took effect January 1, 2020 and extends employee classification status to gig workers, is designed to regulate companies that hire gig workers in large numbers, such as Uber, Lyft, and DoorDash.
Reclassification as an employee entitles workers previously considered independent contractors to all of the benefits, breaks, and sick days afforded to employees under California state law. Industry experts estimate that reclassifying workers as employees increases labor costs by 20-30 percent.
Uber and Lyft maintain that the law will change the essential nature of the work, limiting drivers’ flexibility, as the companies create shifts and schedules to avoid paying too many drivers at slow times. Many drivers value the independence that the independent contractor classification allows, and not all workers want to work 9-5 for just one employer.
AB5 shoehorns workers and their clients into a one-size-fits-all traditional employment arrangement, even though surveys indicate that those who choose to freelance have more job satisfaction than those who work as traditional employees.
In December, Uber, delivery start-up Postmates, and two contractors who work for the companies filed suit against the state of California, arguing that AB5 is unconstitutional. A U.S. District Judge rejected plaintiffs’ request for a preliminary injunction, and the parties have appealed to the United States Court of Appeals for the 9th Circuit, where Independent Women’s Law Center filed a brief in support of gig workers who wish to maintain their independent contractor status.
While Uber’s lawsuit was making its way through the federal courts, the California Attorney General sued Uber and Lyft in state Superior Court demanding compliance. Uber and Lyft asked to stay the state court litigation until the 9th Circuit rules on their constitutional challenge to the law. That request was denied.
In ruling against the ride-share companies, San Francisco Superior Court Judge Ethan Schulman wrote that the status quo deprives drivers “of the panoply of basic rights to which employees are entitled under California law” and that “substantial public harm will result” if the companies do not comply with AB5.
The ruling, issued on August 10, was stayed for ten days to allow the ride-sharing companies to appeal.
In response to the decision of the Superior Court, as Uber spokesperson Davis White issued the following statement:
“When over 3 million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry during an economic depression.”
Read IWLC’s brief in Olson v. California HERE.