The State of California will proceed with a lawsuit against ride-sharing companies Uber and Lyft. The lawsuit alleges that Uber and Lyft misclassify their drivers as independent contractors and fail to provide employee benefits under the state’s new labor laws.
This move comes amidst a global pandemic when many workers are staying at home to curb the spread of disease.
California’s new labor laws
In September 2019, California passed Assembly Bill 5, a new labor law that changes the way employers classify independent contractors. The law went into effect on January 1, 2020, and requires that companies like Instacart and Postmates provide their workers the benefits due to full-time employees, including health coverage, minimum wage and workers’ compensation.
The law demands a new test for businesses to classify their employees as independent contractors. Companies must demonstrate an employee is free from company control, performs work outside of a business’ primary function, and conduct similar work independently from the company. Lyft plans to fight the lawsuit while Uber implements mechanisms attempting to prove worker independence.
Joining food delivery services like DoorDash, these companies are pooling resources by funding a ballot initiative that would exempt their employees from the law. Along with this alternative, these companies hope to expand employee benefits with guaranteed minimum earnings and health coverage. Californians will likely have the chance to vote on the initiative come November.
The lawsuit comes at a time when both companies are considering cost-cutting measures to endure through the pandemic. Lyft has already laid off 17% of its workforce.
The suit also alleges the ride-hailing companies owe payroll taxes and unpaid wages due to employee misclassification. The lawsuit seeks civil penalties and a ruling to prevent such misclassifications from occurring in the future.
Bring questions to an attorney today
Workers impacted by the new AB-5 law likely have questions about potential misclassification from their employers. A local attorney familiar with California workers’ rights and employment law can provide answers and assess any potential claims against an employer.