San Francisco Judge Rules Drivers With Ride-Sharing Companies Are Employees. Uber Warns It’ll Have To Raise Prices By as Much as 111 Percent.
A San Francisco judge ruled Monday that Uber and Lyft must classify their drivers as employees, a momentous decision that potentially puts companies on the hook for providing extensive benefits to these workers, including overtime pay and health insurance.
The decision came in response to a lawsuit filed back in May by California Attorney General Xavier Becerra. He, alongside the city attorneys from Los Angeles, San Diego, and San Francisco, argued that the companies were misclassifying their drivers as independent contractors under the state’s recently passed Assembly Bill (A.B.) 5.
That law, which went into effect in January, set out three requirements that a worker would have to meet in order to be considered an independent contractor. This “ABC” test requires that a contractor be a) free from the control of the entity hiring them, b) be performing work outside the scope of the entity hiring them, and c) be “customarily engaged” in the kind of work they are being hired to perform.
Uber and Lyft have argued that their drivers can be considered contractors under this ABC test because they are technology companies connecting riders to drivers, not transportation companies hiring drivers to perform rides.
It was an argument that San Francisco Superior Court Judge Ethan Schulman flatly rejected.
“Defendants’ insistence that their businesses are ‘multi-sided platforms’ rather than transportation companies is flatly inconsistent with the statutory provisions that govern their businesses as transportation network companies,” wrote Schulman. “It also flies in the face of economic reality and common sense.”
The ruling has provoked a backlash from Lyft and Uber, who argue that the vast majority of their drivers prefer the flexibility that comes with being independent contractors, and that having to classify drivers as employees will dramatically increase the cost of rides.
“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,” said a Lyft spokesperson to Business Insider.
Should drivers be classified as employees, “Uber would only have full-time jobs for a small fraction of our current drivers and only be able to operate in many fewer cities than today,” wrote Uber CEO Dara Khosrowshahi in a Monday op-ed for The New York Times. “Rides would be more expensive, which would significantly reduce the number of rides people could take and, in turn, the number of drivers needed to prov
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