Less than two weeks before California voters will decide whether to exempt the ride-hailing companies from the state’s gig economy law, a California appeals court ruled Uber and Lyft must reclassify their drivers as employees instead of independent contractors.
The ruling will not have an immediate impact on the companies or their drivers because it doesn’t take effect for at least 30 days, but it is a significant development in what has been a tough fight for both sides.
According to CBS News, the two ride-sharing companies were fighting an August preliminary injunction enacted by a San Francisco judge forcing Uber and Lyft to reclassify their drivers as employees. However, the appellate ruling found “no legal error” in the injunction and allowed it to stand.
“We conclude that the injunction was properly issued in accordance with enduring principles of equity,” the 74-page ruling said according to CBS. “It is broad in scope, no doubt, but so too is the scale of the alleged violations.”
Both Uber and Lyft released statements pushing their customers and voters to approve Prop. 22, which would treat app-based drivers as contractors.
If Prop. 22 passes Uber, Lyft, food delivery drivers, and others would continue to be classified as independent contractors. Several concessions, such as benefits, including a minimum earnings guarantee based on when a driver has a passenger or when a delivery driver is on a trip, would be made.
If Uber and Lyft are forced to treat their drivers as employees, it could lead to both apps leaving the state rather than being forced to provide their drivers minimum wage, overtime, paid sick leave, and unemployment insurance.
California Attorney General Xavier Becerra said in a statement the ride-sharing companies have used their muscle to resist treating drivers like employees, but now the tables have turned.
“Californians have fought long and hard for paycheck and benefit protections. Uber and Lyft have used their muscle and clout to resist treating their drivers as workers entitled to those paycheck and benefit protections,” Becerra said.
“The courts saw right through their arguments. In the midst of a COVID health and economic crisis, what worker can afford to be denied basic protections like paid sick leave, unemployment insurance, minimum wage, or overtime? Today’s decision comes on the same day that the federal government reports that more than 1 million Americans filed for unemployment benefits—and 3 of every 10 of them are gig workers or self-employed. But remember, companies like Uber and Lyft that classify gig workers as ‘independent contractors’ don’t pay into unemployment benefit funds for workers.”