California sues Uber, Lyft over misclassifying drivers
as contractors
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[May 06, 2020] By
Tina Bellon
(Reuters) - California and three of its
largest cities on Tuesday sued Uber Technologies Inc and Lyft Inc,
accusing them of classifying their drivers improperly as independent
contractors instead of employees, evading workplace protections and
withholding worker benefits.
The suit, joined by Los Angeles, San Francisco and San Diego, was
brought under a new state law intended to protect workers in the
so-called gig economy. It argued the companies' misclassification harms
workers, law-abiding businesses, taxpayers, and society more broadly.
The controversial law strikes at the heart of the business model of
technology platforms like Uber, Lyft, Postmates, DoorDash and others who
rely heavily on the state's 450,000 contract workers, not full-time
employees, to drive passengers or deliver food via app-based services.
"No business model should hang its success on mistreating workers and
violating the law," California Attorney General Xavier Becerra said
during a virtual news conference with his city counterparts, adding that
Uber and Lyft drivers lacked basic worker protections, including sick
leave and overtime payment.
Shares in Uber and Lyft dropped briefly but recovered shortly after the
lawsuit was announced.
Uber shares were up more than 2% and Lyft shares flat in a broadly
positive market.
Uber in a statement said it will contest the action in court, while
pushing for the implementation of its own proposal for additional driver
benefits.
"At a time when California's economy is in crisis with four million
people out of work, we need to make it easier, not harder, for people to
quickly start earning," the company said.
Labor unions argue that Uber is trying to circumvent labor laws by
creating a new "underclass" of worker entitled to significantly fewer
benefits than traditional employees.
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A car with a Lyft logo in its window drives down a street as the
company prepares for its upcoming IPO in New York, U.S., March 19,
2019. REUTERS/Lucas Jackson
Lyft in a statement said it would work with the attorney general and mayors, "to
bring all the benefits of California’s innovation economy to as many workers as
possible." The company declined to say whether it was pursuing a settlement or
would fight the lawsuit in court.
Uber in December sued to block the new law, which is known as AB5, arguing that
it punished app-based companies. The company on Tuesday said the new lawsuit was
unfairly and arbitrarily singling out ride-hailing companies, but also posed a
threat to independent workers across industries.
The companies in the past have said their drivers were properly classified as
independent contractors, adding that the majority of them would not want to be
considered employees, cherishing the flexibility of on-demand work.
The city attorneys on Tuesday did not say whether they had immediate plans to
sue other gig economy companies.
The coronavirus crisis in particular has exposed gig workers' lack of a safety
net, with tens of thousands of them seeking sick leave and unemployment
benefits.
"American taxpayers end up having to help carry the load that Uber and Lyft
don’t want to accept. These companies will take the workers’ labor, but they
won’t accept the worker protections," Becerra said.
Becerra also referred to Uber's and Lyft's push to include its drivers in a
federal coronavirus relief bill for unemployment benefits. Those benefits are
generally reserved for workers whose employers pay into the unemployment
insurance system, which Uber and Lyft do not.
(Reporting by Tina Bellon in New York; additional reporting by Peter Henderson;
Editing by Bill Berkrot and Marguerita Choy)
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