Since Uber and Lyft launched almost a decade ago, their drivers have lacked most basic worker protections, including a guaranteed minimum wage, overtime pay, workers’ compensation and unemployment insurance.
That’s because, from the onset, the two ride-hailing giants categorized drivers as independent contractors rather than employees, a tactic adopted by subsequent startups like DoorDash, Postmates and Instacart. It’s at the heart of the business model that fuels what is now called the “gig economy.”
And for years, drivers and other workers in the gig economy have been fighting to be recognized as employees and have pushed to get the backing of lawmakers.
On Tuesday, they scored a big victory.
California Attorney General Xavier Becerra, joined by city attorneys in San Francisco, Los Angeles, San Diego and other jurisdictions across the state, filed a lawsuit against Uber and Lyft over their use of contractors. The suit aims to force the two companies to recognize their workers as employees under the authority of Assembly Bill 5, a state law that went into effect this year that significantly limits which workers can be classified as contractors.
In announcing the lawsuit, Becerra outlined its three goals: to stop misclassifying workers, assign penalties and seek restitution.
The litigation, he said, is based on the premise of “unfair competition” — which asserts that Uber and Lyft have an advantage over other businesses that are following the law and providing their workers with employee protections.
If the effort is successful, the two companies could be forced to pay a penalty of as much as $2,500 per driver, which would amount to billions of dollars.
“These companies are willing to take these workers’ labor as drivers,” Becerra said at a press conference Tuesday. “But they don’t want to accept the worker protections that should go with that work, as these employees should get.”
In a statement sent to KQED, Lyft said, “We are looking forward to working with the Attorney General and mayors across the state to bring all the benefits of California’s innovation economy to as many workers as possible.” Uber said it would contest the suit in court.
The lack of protections for Uber and Lyft drivers has come to a head in the current pandemic. Stay-at-home orders have left hundreds of thousands of ride-hail drivers in California with little to no work, forcing them to apply for unemployment benefits. But because of their status as contractors, they have never paid into the state’s unemployment fund. And that means the state is currently covering the cost.
Becerra said the lawsuit has been in the works for months, but admits that the pandemic sped up the process. Of worker misclassification, he said, “Sometimes it takes a pandemic to shake us into realizing what that really means and who suffers the consequences of it.”
The lawsuit is another step in a years-long legal battle over gig worker classification in California, one that has involved the state’s Supreme Court, Legislature and now, its executive branch.