California AG sues Uber, Lyft over employee classification

California Attorney General Xavier Becerra (D) and a group of city attorneys filed a lawsuit against Uber and Lyft on Tuesday, alleging they have broken state laws by classifying their drivers as independent contractors rather than employees.

The law, known as AB 5, requires companies to classify their workers as full employees if the firm has control over how they perform tasks or if the tasks are a routine part of the company’s core business.

Uber and Lyft are among the gig companies operating in California that have resisted the law, which went into effect on January. Uber has claimed its core business is technology, rather than rides.

The lawsuit filed in San Francisco County Superior Court seeks to compel the ride-sharing giants to classify drivers as full employees, demanding civil penalties and restitution for drivers.

The back wages and penalties could add up to hundreds of millions of dollars.

“California has ground rules with rights and protections for workers and their employers,” Becerra said in a statement.

“We intend to make sure that Uber and Lyft play by the rules.” 

Drivers classified as contractors are not guaranteed access to basic employee protections such as a guaranteed minimum wage, sick leave, unemployment insurance or the right to organize.

The coronavirus pandemic has highlighted the precarious situation that puts thousands of the drivers in.

“Californians who drive for Uber and Lyft lack basic worker protections — from paid sick leave to the right to overtime pay,” Becerra said.

“Sometimes it takes a pandemic to shake us into realizing what that really means and who suffers the consequences.”

Both ride-sharing companies have offered some paid sick leave to drivers who test positive for COVID-19, the disease caused by the coronavirus, and promised to provide personal protective equipment like masks and hand sanitizer.

Lyft said in a statement on the lawsuit filed Tuesday that the company is “looking forward” to working with the attorney general and California’s mayors to “bring all the benefits of California’s innovation economy to as many workers as possible.” It did not respond to questions about the allegation of drivers being misclassified.

Uber did not immediately respond to a request for comment.

Uber CEO Dara Khosrowshahi sent a letter to President Trump in March asking the White House to consider legislative action on a “third way” worker classification that could let gig companies maintain the flexibility of having independent contractors while adding some basic worker protections.

The proposal has been criticized by labor groups who say it would leave drivers without basic protections.

The coronavirus pandemic has hit both Uber and Lyft hard as many Americans are staying in their homes.

Demand has cratered, leading Lyft to lay off roughly 17 percent of its corporate workforce. Both companies are set to release first quarter earnings reports this week.

Updated: 3:25 p.m.