On Monday, a judge in California has granted the state’s request for a preliminary injunction to reclassify its drivers as employees. Under the ruling, both Uber Technologies and Lyft will be blocked from classifying their drivers as independent contractors. The order will come into effect in 10 days.
Judge Ethan Schulman’s ruling will is a heavy defeat for the ride-hailing companies. In the order, Judge Schulman wrote “The Court is under no illusion that implementation of its injunction will be costly.” He then added, “There can be no question that for Defendants to comply with A.B. 5, they will have to change the nature of their business practices in significant ways, such as by hiring human resources staff to hire and manage their driver workforces.”
The ruling comes as both the companies defend against a lawsuit filed on May 5 by state Attorney General Xavier Becerra and the cities of Los Angeles, San Diego, and San Francisco. They have been accused of violating Assembly Bill 5 or AB5, a state law that requires companies to classify workers as employees if they controlled how they did their jobs.
The lawsuit filed in the Superior Court of San Francisco argues that both Uber and Lyft depriving its drivers of the right to minimum wage and overtime, disability insurance, access to paid sick leave, and unemployment insurance. It seeks $2,500 and another $2,500 in penalties for each violation under the California Unfair Competition Law and violations against senior citizens or people with disabilities.
“The vast majority of drivers want to work independently, and we’ve already made significant changes to our app to ensure that remains the case under California law,” an Uber spokesperson said. “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.”
In a statement, Los Angeles City Attorney Mike Feuer says “This is a resounding victory for thousands of Uber and Lyft drivers who are working hard – and, in this pandemic, incurring risk every day – to provide for their families.”
California voters are expected in November to consider a ballot measure, Proposition 22, to classify app-based drivers as contractors. The state is Uber’s and Lyft’s largest U.S. market.
A Lyft spokesperson said, “Drivers do not want to be employees, full stop.” Adding “We’ll immediately appeal this ruling and continue to fight for their independence. Ultimately, we believe this issue will be decided by California voters and that they will side with drivers.”
Several hundred thousand “gig” workers, including many at ride-hailing companies and app-based food delivery services, are affected by AB5, which took effect on Jan. 1 and had broad support from organized labor.