Uber and Lyft Drivers Classified as Employees: CA Appeals Court Ruling

An appeals court has mandated that Uber and Lyft categorize their drivers as employees; however, the implementation of this ruling is currently paused for 30 days following the issuance of the remittitur, which is still pending. Consequently, the outcome of the Proposition 22 ballot measure could ultimately determine how these companies classify their drivers within California.

Throughout the legal proceedings, Uber and Lyft maintained that reclassifying drivers as employees would inflict substantial and irreversible damage on their businesses. The judge’s decision refuted this claim, stating that neither company would experience any “serious or permanent harm” by adhering to the law, and that any financial challenges they face would not constitute “irreparable harm.”

Furthermore, the judge clarified that the preliminary injunction would not impede Uber and Lyft’s ability to provide drivers with flexibility and independence. The judge also noted that Uber and Lyft have had ample opportunity to transition their drivers from independent contractor status to employees, considering the pivotal 2018 ruling that led to the passage of AB 5, the legislation that initiated this lawsuit.

“This decision underscores the critical need for voters to support drivers and approve Prop. 22,” stated Lyft spokesperson Julie Wood in a communication with TechCrunch.

Proposition 22 is a California ballot measure aimed at maintaining the classification of rideshare and delivery drivers as independent contractors. If enacted, this measure would exempt drivers and delivery personnel from a recently established state law requiring their classification as W-2 employees. Should it pass, workers engaged in app-based transportation and delivery services would become eligible for benefits such as minimum earnings and healthcare assistance, calculated based on active driving hours.

Lyft has indicated it is evaluating all available legal avenues, potentially including an appeal to the California Supreme Court. Uber is similarly assessing its options for further appeals.

“The court’s ruling today signifies that, unless voters approve Proposition 22, rideshare drivers will be prohibited from continuing their work as independent contractors, potentially leading to job losses for hundreds of thousands of Californians and the possible cessation of ridesharing services across a significant portion of the state,” explained an Uber spokesperson to TechCrunch. “We are considering our appeal options, but the implications are substantial for drivers – 72% of whom favor Prop 22 – and for the California economy, which currently faces widespread unemployment, with an additional 158,000 individuals filing for unemployment benefits this week.”

This judicial decision follows California Superior Court Judge Ethan Schulman’s granting of a preliminary injunction in August, compelling Uber and Lyft to reclassify their drivers as employees. While Uber and Lyft contested this decision through an appeal, the appeals court has now upheld the lower court’s ruling.

The legal action was initiated in May by California Attorney General Xavier Becerra, alongside city attorneys representing Los Angeles, San Diego, and San Francisco. They contended that Uber and Lyft gain an unfair competitive advantage by incorrectly classifying workers as independent contractors. Subsequently, in June, the plaintiffs requested a preliminary injunction to compel Uber and Lyft to reclassify their drivers, which Judge Schulman granted in August.

“While this legal victory focuses on two companies, the broader implications are far-reaching,” Gig Workers Rising stated. “This concerns the future of work in this nation. It is about securing quality employment with comprehensive benefits for future generations. If Uber and Lyft succeed in passing Prop. 22 and override the public’s will, they will encourage numerous other corporations to replicate their business practices and misclassify workers to further benefit a select few at the expense of their workforce.”