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Court Rules Uber and Lyft Must Classify Drivers as Employees, Not Contractors

(Noted News) — California courts have upheld a ruling to make rideshare drivers employees—rather than keep them as independent contractors—despite hundreds of millions of dollars in lobbying from rideshare giants Uber and Lyft.

Proposition-22, the ballot measure in question, essentially seeks to thwart previously passed Assembly Bill 5, or AB-5, which codifies an “ABC” test to determine if workers are employees entitled to labor protections and benefits. This test requires employers to meet three requirements to prove that their employees are independent contractors, whereas, under Prop-22, it would be up to them to decide. 

Uber argues that being forced to designate its drivers as employees would irreparably damage the company by burdening them with extra costs that would ultimately be passed on to the consumer. Furthermore, employee status for the drivers, Uber says, would take away the flexibility of work hours which is predominantly how Uber drivers “prefer to work”.

Uber economist Allen Stein says, “Businesses simply won’t survive if they have zero control over what their hourly employees, whether full or part-time, actually do.”

“Uber’s incentive as an employer, then, would be to limit the number of employed drivers, hiring fewer drivers to do more trips, and requiring them to work a certain number of hours (but likely preventing them from working overtime).”

Prop-22 attempted to provide alternatives to the benefits of the bill it was trying to subvert, such as the promise of giving employees “120% of minimum wage,” which would be $15.60 an hour in California. However, the UC Berkeley Labor Center estimates that the $15.60 an hour would ultimately turn into $5.64 an hour due to “multiple loopholes” in the proposition, which allow the companies to only pay drivers for the time they spend driving and fulfilling a ride, rather than the actual time out of their day. 

Another offer from Prop 22 was the $0.30 compensation to drivers per every mile driven. However, the IRS estimates that the cost of owning and operating a vehicle is about $0.58, meaning Prop-22’s compensation for drivers appears to cover just half of a driver’s expenses.

Some things that Prop 22 does not offer are the right to workers’ compensation, family leave, unemployment insurance, sick leave, or labor unions.

Michael Reich, one of Berkeley’s analysts, claims that making drivers employees would likely boost their wages by 30%.

Despite contrary claims from Uber and Lyft, the judge said that neither company would end up facing “grave or irreparable harm by being prohibited from violating the law” and that any financial burdens faced “do not rise to the level of irreparable harm.”

This decision has a 30-day hold on it once the remittitur, which hasn’t been issued yet, goes into effect. Uber and Lyft will likely appeal the decision. 

Adding to their troubles, Uber is now facing a lawsuit from a group of drivers who allege that Uber was “bullying” them into supporting Prop-22. 

The suit alleges that drivers were constantly being sent messages and notifications on their app that they could only close if they clicked “YES ON PROP 22” or “OK” which, according to the complaint, “pressures drivers to accept Uber’s position because it does not provide an option to vote no.”

“Almost every time we log on, we are fed more one-sided information to pressure us into supporting Prop 22,” a plaintiff said. 

The suit states that “Uber’s solicitations have the purpose and effect of causing drivers to fear retaliation by Uber if they do not support Uber’s political preference and may induce many drivers to falsely state that they support being deprived of the rights that California law guarantees to statutory employees.”

David Lowe, one of the attorneys representing the group of workers, classified the messages as “threats” and “propaganda.” 

“Let’s be absolutely clear. Uber’s threats and constant barrage of Prop 22 propaganda on an app the drivers must use to do their work have one purpose: to coerce the drivers to support Uber’s political battle to strip them of workplace protections.”

Matt Kallman, a spokesperson for Uber, said that the lawsuit is absurd.

“This is an absurd lawsuit, without merit, filed solely for press attention and without regard for the facts. It can’t distract from the truth: that the vast majority of drivers support Prop 22, and have for months, because they know it will improve their lives and protect the way they prefer to work.”

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