California sues Uber and Lyft alleging driver misclassification

In furtherance of California’s AB 5, the State of California has sued Uber and Lyft, seeking to re-characterize their drivers as employees, not independent contractors. The State summarized its case in the introductory paragraphs of its Complaint, as follows:

5. Uber and Lyft are transportation companies in the business of selling rides to customers, and their drivers are the employees who provide the rides they sell.  The fact that Uber and Lyft communicate with their drivers by using an app does not suddenly strip drivers of their fundamental rights as employees.

6. But rather than own up to their legal responsibilities, Uber and Lyft have worked relentlessly to find a work-around.  They lobbied for an exemption to A.B. 5, but the Legislature declined.  They utilize driver contracts with mandatory arbitration and class action waiver provisions to stymie private enforcement of drivers’ rights.  And now, even amid a once-in-a century pandemic, they have gone to extraordinary lengths to convince the public that their unlawful misclassification scheme is in the public interest.  Both companies have launched an aggressive public relations campaign in the hopes of enshrining their ability to mistreat their workers, all while peddling the lie that driver flexibility and worker protections are somehow legally incompatible.

7. Uber’s and Lyft’s motivation for breaking the law is simple: by misclassifying their drivers, Uber and Lyft do not “bear any of [the] costs or responsibilities” of complying with the law.  (Dynamex, supra, 4 Cal.5th at p. 913.)  When addressing investors, Uber pulls no punches:  “Our business would be adversely affected if Drivers were classified as employees instead of independent contractors.”  (Uber Securities and Exchange Com. (“SEC”) S-1, p. 28 [Filing Date: April 11, 2019].)

8. As one federal district judge recently observed: “[R]ather than comply with a clear legal obligation, companies like Lyft are thumbing their noses at the California Legislature . . . .”  (Rogers v. Lyft (N.D. Cal. Apr. 7, 2020, No. 20-CV-01938-VC) ___ F.Supp.3d ___ [2020 WL 16484151, at *2].) 9. The State’s laws against employee misclassification protect all Californians.  They protect workers by ensuring they receive the compensation and benefits they have earned through the dignity of their labor.  (Dynamex, supra, 4 Cal.5th at p. 952.)   They protect “law-abiding” businesses from “unfair competition,” and prevent the “race to the bottom” that occurs when businesses adopt “substandard wages” and “unhealthy [working] conditions,” threatening jobs and worker protections across entire industries.  (Id. at pp. 952, 960.)  They protect the tax-paying public, who is often called upon to “assume responsibility” for “the ill effects to workers and their families” of exploitative working arrangements.  (Id. at p. 952-53.)  They are a lifeline and bulwark for the People against the “erosion of the middle class and the rise in income inequality.”  (A.B. 5, § 1(c).) 10. The time has come for Uber’s and Lyft’s massive, unlawful employee misclassification schemes to end.  The People bring this action to ensure that Uber and Lyft ridehailing drivers—the lifeblood of these companies—receive the full compensation, protections, and benefits they are guaranteed under law, to restore a level playing field for competing businesses, and to preserve jobs and hard-won worker protections for all Californians.

The Complaint seeks to have Uber and Lyft’s drivers re-classified as employees, not independent contractors, the imposition of statutory penalties, and an open-ended to-be-proved basket of remedies involving “minimum wages, overtime wages, business expenses, meal and rest periods, wage statements, paid sick leave and health benefits, and social insurance programs.”

Although the drivers at-issue may have entered into arbitration agreements, it is anticipated the State’s lawsuit will not be subject to arbitration because, in this case, it is the State that has filed suit, and the State was not party to the driver arbitration agreements.

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