App-based ride-sharing companies Uber and Lyft continue to battle with the Attorney General and various city attorneys in California courts about how to properly classify its drivers. On October 22, 2020, the California Court of Appeal issued an opinion agreeing with a lower court ruling that Uber and Lyft drivers are employees and not independent contractors. Currently, Uber and Lyft classify such workers as independent contractors. According to the Court of Appeals, a classification likely violates California’s worker status law, also known as “Assembly Bill 5,” or “AB 5,” which took effect January 1 of this year.
Uber and Lyft’s fight does not stop here. Both companies have contributed a significant amount of money supporting the Proposition 22 campaign, a voter initiative that will appear on the ballot in California on November 3. This would partially exempt companies like Uber and Lyft from providing employee benefits to certain drivers. If Prop 22 does not pass, Uber and Lyft could appeal this case to the California Supreme Court for further consideration.
For the time being, the court ordered Uber and Lyft to reclassify its workers as employees, giving them a 30-day “grace” period from the date of the October 22 ruling. This is a good reminder for employers in all states to take a look at any independent contractor agreements to assess if they should be reclassified as employees. If you have any questions about this case or your independent contractors, please contact Employers Council.