Ruling Forces Ridesharing Services to Reclassify Drivers as Employees in California

The future of ridesharing services, such as Uber and Lyft, in California are very much in jeopardy as on Thursday, a California appeals court stated that the two companies must reclassify their drivers as employees rather than independent contractors. The decision, which reaffirms a lower court’s ruling, gives Uber and Lyft 30 days to comply with the ruling, assuming they do not appeal the decision.

For years, ridesharing services have considered their workers to be independent contractors, which gives drivers more independence to work on a flexible schedule and saves the employer money on having to pay taxes on their drivers, as well as on other benefit, such as health care and disability insurance. The lawsuit is one of the first to stem from a controversial law that took effect in the state at the beginning of the year. Assembly Bill 5 (AB-5) requires that all employers classify the people that work for them as employees. The only provision to classify them as independent contractors is if they operate outside of the company’s control and are not a part of the company’s core business.

Uber and Lyft have stated that they cannot afford to classify their drivers as employees and pay those benefits in California. As a result, they threatened to shut down their service in the state if the courts force them to take that step. However, such threats and court decisions can become irrelevant if a proposition passes on Nov. 3. Proposition 22 would allow ridesharing services, as well as delivery drivers, to continue as independent contractors. Given the high stakes involved in this vote, the companies have been lobbying aggressively over the proposition. To date, they have poured almost $190 million into the campaign to ensure that the proposition passes.

If the measure fails, Uber and Lyft can still appeal the court’s decision; a representative from the two companies told a published report that they are weighing their legal options. In speaking with the appeals court prior to the ruling, the CEOs of both Uber and Lyft said that they would comply with the ruling to change the classification of their drivers, however such a change will come at a price for California. They said that the dramatic shift in business models will mean a restriction on the number of drivers the company can hire, meaning there will be a reduction in service as well.

If you were misclassified as an independent contractor by your employer, contact the California misclassification lawyers at Miller Shah LLP today. Call us at 866-540-5505 or contact us online to get started. Our offices are located nationwide, including in California.