The Gig Economy Under Threat As California Court Rules Uber Drivers As Employees

In a landmark judgment, a California judge has ruled that Uber and Lyft drivers cannot be classified as independent contractors and issued a preliminary injunction to that effect.

The state of California had in May filed a lawsuit challenging the classification of Uber and Lyft drivers as non-employees. The lawsuit argued that it goes against the state’s new labor law (AB5), enacted in January. The law weighed in on a three-part standard to determine the status of an independent contractor.

1. They are free from company’s control;
2. They are doing work that isn’t central to the company’s business;
3. They have an independent business in that industry.

The three-part standard stands in contrast with the gig economy and e-hailing companies are at the helm of it.

California is the parent state of both Uber and Lyft, and it is the biggest market for e-hailing services. The rule will ensure that hence, drivers and on Uber and Lyft platforms get employment benefits. But judge Ethan Schulman of the San Francisco superior court where the verdict was reached, gave a 10-days window for the enforcement, to give companies a chance to appeal.

Uber said it plans to appeal the ruling which it described as insensitive to the plights of drivers in the middle of a pandemic, when the government should be working on providing jobs for the people.

“The court’s ruling is stayed for a minimum of 10 days, and we plan to file an immediate emergency appeal on behalf of California drivers. The vast majority of drivers want to work independently, and we’ve already made significant changes to our app to ensure that remains the case under California law. When over 3 million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry during an economic depression,” Uber’s spokesperson said in a statement.

In response to the California state’s new law, Uber announced new features on its app to help the drivers stay flexible. The updates which took effect mid-January include seeing trip information upfront to help drivers make informed decisions. The information will include trip time, distance, destination and fares. The update also empowers drivers to accept or reject rides without being punished. Uber promised to introduce more features that will make the job more flexible for drivers.

Lyft said the ruling undermines the wishes of the drivers who don’t want be employees, and enjoy working as independent contractors.

“Drivers do not want to be employees, full stop. We’ll immediately appeal this ruling and continue to fight for their independence. Ultimately, we believe this issue will be decided by California voters and that they will side with drivers,” Lyft spokesperson said.

The Guardian reported that Uber, Lyft and DoorDash have spent more than $100 million on a 2020 ballot that aims to incite voters against the AB5. But they were chided as the move was cited in the suit as “an aggressive public relations campaign in the hopes of enshrining their ability to mistreat their workers,” even in the middle of “a once-in-a century pandemic.”

However, the drivers are divided on what they really want. While many of them want such flexible work without entitlements that will hinder their independence, others want their efforts rewarded with employment benefits.

The judgment is the first of its kind for the gig economy in the United States, but not in the UK.

In 2016, Uber drivers in London, led by Yaseen Aslam and James Farrar, took to the streets to demand employment rights. The protests birthed a lawsuit that challenged the gig economy. The employment tribunal ruled in favor of the drivers, but Uber appealed the judgment and likewise lost in the appeal court. In its final attempt to save its business model and probably the gig economy, the ride-hailing company heads to the Supreme Court.

As the UK drivers wait on the verdict of the Supreme Court, the development in California is signaling the beginning of the gig economy’s disruption.

Uber has defended its business model saying that the majority of the drivers want to be treated as self-employed. But on the other side of the case, the claimants said the ruling will determine if workers will continue to be abused under the gig economy.

“This is our final showdown with Uber but the stakes could not be higher for everyone. If Uber wins, there will be an unseemly rush by greedy employers to collapse employment as we know it and Uber-ize the entire economy. Uber drivers and other gig economy workers would be robbed of the right to unionize,” said Aslam.

The gig economy has denied many full-time workers employment benefits, including the protections that the law provides in times of crisis.

Mathieson, an associate of Bates Wells’ employment team said “this landmark case will have enormous implications for how well, or badly, workers in the fastest growing sector of the economy are treated.”