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California Uber and Lyft Drivers Reclassified as Employees

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California Uber and Lyft Drivers Reclassified as Employees

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In May of 2020, the State of California sued Uber and Lyft for failing to comply with AB5, a new employment bill classifying ride-hail drivers as employees.

Uber and Lyft both tried to appeal the ruling requiring their compliance, claiming that the ruling was unfair and that it would adversely affect their drivers. However, the ruling was upheld in a court of appeals.

California’s new AB5 has stirred up debate.

AB5 is intended to reclassify ride-hail, food delivery, and app-based workers as official employees rather than “gig” workers or independent contractors. This employee classification ensures certain protections for previous independent contractors, such as minimum wage, employee benefits, and unemployment benefits.

The difficulty with this bill is that while the government points out all the ways it benefits ride-hail drivers, Uber and Lyft are vehemently opposed to it. These rideshare titans claim that their drivers are better off exempt from this law and that reclassifying independent contractors as employees will put thousands of Californians out of work.

Workers must pass the “ABC test” to determine if they are independent contractors or employees.

According to the ABC test, a worker is considered an employee unless the company can prove that the worker is free from the control and direction of the company, performs work that is outside the usual scope of the company’s business offerings and is customarily and independently engaged in an established trade. Under all of these standards, Uber and Lyft drivers are not considered independent contractors, requiring these companies to treat their drivers like full-fledged employees.

Classifying their drivers as independent contractors allows them to offer fast, low-cost services.

With the money these companies have previously been saving by classifying drivers as gig workers rather than full-time employees, these companies are able to offer quick rides at a low-cost to customers. However, these time-related and financial conveniences do come at the expense of important benefits their drivers might otherwise receive, like health insurance, paid time off, and other benefits.

Perhaps most important to consider is that these companies claim their drivers do not want to be employees. They point out that most of their drivers work part-time, and use their driving services as a temporary outlet to pay the bills when they lose their jobs or find themselves facing other expenses. It is the flexibility of contract work that Uber and Lyft identify as the primary advantage of their drivers’ experience; an advantage they do not want to give up due to employee classification.

The COVID-19 pandemic has dealt a serious blow to rideshare business.

With federal and state shut-downs and social distancing orders in place, people are going out less than ever. This has resulted in a significant drop in business for these rideshare companies. Lyft claims that their rides are down 75% from April due to the effects of the pandemic.

These companies point out that to reclassify their drivers as employees would require an expensive and timely restructuring of their entire business model and would require established schedules that their drivers will not want to abide by. However, the judge who ruled in favor of AB5 pointed out that the adverse effects of the pandemic may offer a potential opportunity for the companies to restructure with minimal damage.

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