SAN FRANCISCO—The big ride-sharing apps Uber and Lyft break California law by misclassifying their drivers as “independent contractors,” not “employees” with worker rights. Now a San Francisco judge is ordering them to follow it.
Not only that, but the state Labor and Industries Department decided the same day as the judge ruled to sue the two firms for wage theft, too, and for that same “misclassification” reason.
In a 34-page decision on Aug. 10, Judge Edwin Schulman of Superior Court in San Francisco—the trial court level in California’s system—approved the state’s demand for a preliminary injunction against the two firms’ driver misclassification. That means they must stop doing it.
But Schulman held off imposing his edict for 10 days to give them time to prepare an appeal, which they promptly promised to do. Nevertheless, his ruling was full of scathing criticism of Uber and Lyft’s “prolonged and brazen refusal” to obey state law.
No firm, “no matter how wealthy, is above the law in California,” state AFL-CIO Executive Secretary-Treasurer Art Pulaski said when Attorney General Xavier Becerra originally sued. Uber and Lyft should “immediately follow the law and stop cheating drivers and taxpayers—or face the serious legal consequences of refusing to do so.”
The firms “are not entitled to an indefinite postponement of their day of reckoning,” was one of Schulman’s milder comments. Uber and Lyft called themselves “platforms,” but that “defies economic reality and common sense,” the judge wrote.
Becerra and the city attorneys of Los Angeles, San Francisco, and San Diego sued Uber and Lyft on May 5 for breaking state law. The law, AB5, which workers convinced lawmakers to enact last year, sharply restricts when firms can classify workers as “independent contractors.” It set in legal stone a two-year-old state Supreme Court ruling.
Under both state and federal labor law, when a worker is an “employee,” she’s entitled to all worker rights, including the right to organize. And her boss must pay her the minimum wage and time-and-a-half for overtime, pay the company’s share of Social Security and Medicare payroll taxes, and pay into state workers’ comp and unemployment insurance funds. California labor law also includes paid family and medical leave.
But when a worker is an independent contractor, he has no rights, can be paid less than the minimum wage, gets no overtime pay premium, and must shoulder both the worker’s share and the boss’s share of the taxes, the jobless benefits, and the workers’ comp.
The practical effect is to leave workers both exploited and defenseless. AB5 basically outlawed such abuse. Companies abuse “independent contractors” in order to fatten their bottom lines, though Uber and Lyft haven’t turned a profit yet in California, their largest market.
That hasn’t stopped them from pumping millions of dollars into putting a referendum on this November’s ballot repealing AB5. They’re also challenging AB5 in federal court. In response, as part of their electoral program, California AFL-CIO convention delegates voted in early August to oppose that Proposition 22.
Meanwhile, the state Labor and Industries Department sued the two firms for wage theft from at least 5,000 drivers, also by misclassifying the workers as independent contractors.
“The lawsuits seek to recover amounts owed to all of Uber’s and Lyft’s drivers, including the nearly 5,000 who filed claims for owed wages with the Labor Commissioner’s office. Moreover, the lawsuits seek recovery for a wider range of statutory violations and damages than those asserted in individual wage claims and other lawsuits,” Commissioner Lilia Garcia-Brower told the Superior Court in Alameda County (Oakland).
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