Coronavirus

Coronavirus Has Devastated Uber and Lyft's Business. Now California Is Suing Them.

A lawsuit filed yesterday by California Attorney General Xavier Becerra accuses the companies of misclassifying their drivers as independent contractors.

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Things are going from bad to worse for ridesharing companies during the coronavirus pandemic. Business is way down, while legal troubles continue to mount.

On Tuesday, California Attorney General Xavier Becerra along with the city attorneys of Los Angeles, San Francisco, and San Diego, filed a lawsuit against Uber and Lyft. Their complaint accuses the companies of misclassifying their drivers as independent contractors, not employees, in violation of the state's famous gig economy law, Assembly Bill 5 (A.B. 5).

The lawsuit is the latest flashpoint in rideshare companies' long battle with state and local governments over what rules should govern their relationship with their drivers.

"Californians who drive for Uber and Lyft lack basic worker protections—from paid sick leave to the right to overtime pay," Becerra said in a statement. "Sometimes it takes a pandemic to shake us into realizing what that really means and who suffers the consequences."

Tuesday's lawsuit accuses the two companies of a litany of local and state labor code violations stemming from their alleged misclassification of drivers as independent contractors, including not paying minimum wage, not paying overtime, not offering sick leave and meal breaks, and not paying into the state's unemployment and disability insurance funds.

"We will contest this action in court, while at the same time pushing to raise the standard of independent work for drivers in California," an Uber spokesperson told The New York Times, promising to fight the lawsuit.

"We are looking forward to working with the Attorney General and mayors across the state to bring all the benefits of California's innovation economy to as many workers as possible, especially during this time when the creation of good jobs with access to affordable healthcare and other benefits is more important than ever," Lyft said in a more conciliatory statement to Reason.

California's A.B. 5, which codified an earlier state supreme court decision, went into effect in January 2020. It lays out three conditions that a worker must meet to be considered an independent contractor. This three-part test, known as the ABC test, requires a worker to be free from "control or direction" in offering their services, be doing work outside the normal scope of business of the entity hiring them, and be customarily engaged in the kind of work they are being hired to do.

Workers who fail even one leg of this test are considered employees, a status that entitles them to certain benefits and protections while also imposing a long list of regulations on their relationship with their employer.

Rideshare companies have employed a range of arguments to avoid having to classify their drivers as employees, which they say would be both incredibly costly and destroy the flexible work arrangements that make these app-based services appealing to many drivers.

Bloomberg reports that reclassifying drivers as employees would raise rideshare companies' costs by as much as 20 percent.

The companies insist that their status as tech firms who only connect drivers and riders, but who don't tell drivers when or where they have to work, means those offering rides on their platform don't qualify as employees under the ABC test.

In addition, Uber and Lyft have sued to stop A.B. 5 from going into effect. The two companies have also been pouring money into a state ballot initiative that would explicitly exempt their drivers from the law.

In their lawsuit, Becerra et al. argue that Lyft and Uber are fundamentally transportation—not tech—companies, meaning drivers are performing work that is core to their business, and are therefore their employees and entitled to all the benefits that status entails.

The passage and implementation of A.B. 5 have been rife with controversy as everyone from porn stars to truckers have pointed out ways that their reclassification as employees has cost them valued flexibility and income.

Trying to forcibly reclassify rideshare drivers as employees now will likely be even more disruptive given the dire circumstances rideshare companies find themselves in due to COVID-19.

One analytics firm estimates spending on rideshare services has fallen 83 percent during the pandemic, reports the Times. Lyft just announced that it is laying off 17 percent of its workforce. Uber is reportedly considering doing the same.

If Becerra's lawsuit is successful, he might end up winning employment protections for drivers, while putting their newly classified employers out of business.

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  1. Why just Uber/Lyft drivers? No traditional taxi driver is a full-on employee – all are either owner/operators or private contractors, leasing the taxi and dispatch service from the owner.

    1. Uber/lyft 75% of drivers lose money. They trade the value of THEIR OWN VEHICLE for some temporary cash. By the time their vehicle catastrophically breaks down, 2 more idiots took their place. It’s more correct to say uber/lyft STOLE the value of their vehicle (larceny by conversion). It’s a digital plantation. The only reason people stick up for the slavers is that they like cheap cotton and don’t give af how it got picked.
      As for cabbies, they still make money (where they haven’t been run out of business). They also get to wreck someone else’s vehicle and get paid for it. What do they have to complain about?
      Now cab company owners are another story. They have to drink out of a different drinking fountain, i.e. they have two tiered laws and regulations that doesn’t apply to rideshare, even though they’re doing the same function…higher insurance on cabs too.

      1. Does Uber force people to drive for them? If not it is nothing like slavery. And a lot of cabbies don’t make money but they company they work for does. This is all a form of regulatory capture and you support it. I rarely say this but fuck off slaver.

        1. “Does Uber force people to drive for them?”

          Uber forces their drivers to buy expensive new cars before they drive. That’s their rules.

          1. Haha. You’ve got to be kidding.

            Everything is so terrible and unfair.

            1. If you want to drive for Uber, you’ve got to meet their criteria.

          2. So if they want to contract they have to have the correct equipment? I am still not seeing anyone be coerced to work for them. If they don’t want to buy they vehicles they can decide not to sign the contract. So how is that a problem?

            1. “If they don’t want to buy they vehicles they can decide not to sign the contract. So how is that a problem?”

              I never said it was a problem. I said if you want to be an Uber driver, you’ll have to buy a new car, or have someone else buy one for you.

          3. “Uber forces their drivers to buy expensive new cars before they drive. That’s their rules.”

            If by new, you mean 15 years old, then yes.

      2. This is about as stupid as a comment is going to get. An article about independent contractors and a comment about other competing service providers also being independent contractors…

        And you say “Uber/Lyft drivers totally lose money” and call them slavers. Holy crap, that’s stupid.

        First, there’s zero chance that every driver for these companies is so completely stupid that they are losing money on the transaction. People might be dumb, but they aren’t so dumb that they pay their bills with negative income.

        Second, you might be able to make an economic argument if you wanted to… .but slavery? Good lord, these “gig economy” jobs are the absolute antithesis of slavery. You don’t get hired and you work as much or as little as you want, whenever you want, and you set your own rate of pay. Don’t like the offered rate? Turn it down.

        This is so over-the-top stupid that it has to be a paid shill.

        Reason posters are not this dumb… well, except for the sockpuppets and professional shills.

        1. Rentier is a more accurate description than slaver. Uber skims off the driver’s take by virtue of their ownership of the software.

          1. So? The drivers want to use the software and the software manufacturers charge a fee? How is this different than franchising? Or anything else?

            1. “How is this different than franchising? ”

              I don’t think it is. Rent is rent. It’s not slavery.

      3. Haha. So construction workers, real estate agents and property managers don’t beat their vehicles up for work too? They must be getting stolen from as well, correct?

        Everything is so terrible and unfair.

        1. “They must be getting stolen from as well, correct?”

          The cars or the workers?

  2. Uber and Lyft should use the C19 as an excuse to simply stop doing business in CA until the people elect legislators that recognize the freedom inherent in gig work. Just have the app check to see if the location is in CA; if so just show a page saying the state refuses to allow individuals to work for themselves, so the service is not available. Then offer a link to a recall petition for the legislator from the location of the request.

    1. Yeah, why do these companies even operate in California? They should pack up and move out now.

    2. And move their HQs and support staff out of CA. And the rest of Silicon Valley giggers should follow. Silicon Valley has been too stuck up on itself, it needs to happen for these companies to survive.
      Lyft has already moved some operations to Nashville. A lot of traditional businesses are fleeing CA for Austin and Nashville, the film industry is slowly migrating to Atlanta, it won’t register with these Stalinist idiots until they companies leave and so do services available to “regular” Americans

      1. I think this lockdown will accelerate the moves. I am always amazed at how many companies, even tech companies still insist on in person meetings. Now that they are being forced to teleconference and telecommute a maybe they will see the error of their ways and start moving more operations out of these states that punish them for making a profit.

        1. I am not sure. I see a delusional personality type in the tech world that wants to both save humanity and make a billion dollars. Unfortunately, these geeks can not or will not see the political reality of California.

          1. Or they will leave and turn wherever they go into California. See Washington, Oregon, New Mexico, Colorado and Nevada for example (and Austin and Phoenix).

  3. Can’t they learn to not appease the facists in ca

  4. So how’s that train to nowhere going, Gavin? Your AG ever bother to check into that boondoggle and the billions spent on a wasted effort?

    Nope.

  5. I am just devastated for poor UBER and LYFT that built a business model that made the founders billions, based upon openly flouting labor law, and counting on their big law firms to give them immunity. It’s a sad day for a rich man.

    1. You’re right! UBER and LYFT should just go out of business, and everyone can go back to riding government buses like they’re supposed to. Oh, and bullet trains.

      Or you could just fuck off and die, slaver.

      1. “UBER and LYFT should just go out of business”

        If they are losing money perhaps they should go out of business. There’s nothing stopping their drivers from continuing to drive, however, using someone else’s software. Or even their own.

        1. If they are losing money the stock will go down. No need to legislate people out of work who freely choose to drive for them.

    2. “You flouted labor laws”

      Points finger at businesses that pay cash to undocumented aliens.

      Uber was started by Obama staff, around the time ACA went into effect. Why would Obama people want to help businesses dodge the mandated healthcare coverage? I wonder.

  6. As long as Bacerra can keep getting paid off by the labor unions he’ll be happy to keep suing everyone they want to crush. Remember this is the guy who changed the name of the “Repeal the Gas Tax” bill to the “Kill the Money for Road Repairs” bill — and beat it down. A lier and a thief.

    1. Kind of insulting to liars and thieves to imply that Becerra is one of them – they do have their pride you know –

  7. and not paying into the state’s unemployment and disability insurance funds.
    Yeah, always follow the money.

    If Becerra’s lawsuit is successful, he might end up winning employment protections for drivers, while putting their newly classified employers out of business.
    For existing cab companies, Uber and Lyft going out of business is a feature, not a bug. After all, the only people who suffer are the non-union drivers and people who need reliable, timely transportation.

    California’s problem with the gig economy is all those messy 1099s. It’s much easier to fund government if everyone works 9 to 5 and gets one W-2 reporting income taxes withheld from their paychecks.
    The fact that lots of people can use gig jobs to do work they want to do for companies that need the work done, is irrelevant.

  8. Why does anyone even bother with California?

    The far left is embedded in its power structures. Until that shifts a little there are 49 other states to work in.

    1. Not quite 49.
      Hawaii
      New York
      New Jersey
      Illinois
      Oregon
      Washington
      Pennsylvania
      Maryland
      Some of those little states in the upper right hand corner of the map whose name no one knows
      All these should be avoided.

      1. That leaves 36. Still a lot.

        1. Make that 35. Six NE plus the ones you listed.

      2. Oh, I don’t know about that list. WA has no state income tax. Yet. That’s why Boeing, Microsoft and Amazon are all based here.

        That could all change of course.

  9. If an Uber driver is not an independent contractor, there is no such thing as an independent contractor.

    They literally are the most independent of independent contractors. They set their own hours. They set their work location. They bring their own equipment. They even accept/reject job offers multiple times per day.

    Dudes working a 3 month java programming contract are indentured servants by comparison.

    If you can define “not independent contractor” in a way that includes contracts that last less than 15 minutes at a time, what is the point of even bothering with language? Just let the government do whatever the heck they please.

    1. ” what is the point of even bothering with language?”

      Because as ’employees’ Uber drivers would stand to get something like a 30% increase in their take. At least previous articles on the subject have stated that Uber stands to lose that much if their drivers are considered employees. A lot of money at stake, to answer your question.

      1. A 30% increase on one side while losing the flexibility and independence that many of them require to work the job at all.

        What happens when you replace 3 part-timers with one full-timer? One person wins. Two people lose. Even if you want to hire all 3 full time, if you mandate full time hours, there is a greater than even chance that your part-timers cannot or will not take it and will be forced out.

        That is why the insult “slaver” is thrown around so readily in this thread. This bill is literally banning people from the work they want and freely chose and forcing them to work only what the government approves.

        1. “This bill is literally banning people from the work they want and freely chose and forcing them to work only what the government approves.”

          This is not unusual. The government regulates many jobs. Medical doctors require a license, for example. Perhaps the legislators behind this can be voted out of office if the public takes your taunts of slaver seriously.

      2. Sorry to be so late back to the discussion….

        “a lot of money at stake, to answer your question”.

        That doesn’t even address the question. Of course there’s money involved. Not just for Uber, but for taxi and limo companies, employees, customers, and the government.

        But that has nothing to do with defining a 15 minute contract to pick up a ride for a fee as “not an independent contractor”.

        In the strictest sense, this model was built upon having multiple customers and multiple drivers bidding for rides. That’s the origin of the “surge pricing” stuff.

        Arguing “we want more money for the drivers” has nothing to do with pretending that a duck isn’t a duck. It is a duck. There may never have been a more duck-like duck in the history of the world.

        California says that an ER doctor working for Humana is an independent contractor, but a guy who picks up people during rush hour most mornings and evenings as he commutes to work is an employee.

        That’s dumb. Like stupid at a metaphysical level. It is like the Spinal Tap black album…. “How much more dumb could this be… .none… none more dumb”

        That’s completely orthogonal to the “is uber a good boss” discussion, or the “should cab companies be protected from this competition” discussion. You could easily argue that Uber should face different regulations (or that cab companies should face different regulations). You could argue that Uber drivers should unionize and demand 97.3% of all revenue. There’s lots of room for arguing about the economics and regulatory environment surrounding gig economy jobs.

        But you cannot seriously argue that an Uber driver is not an independent contractor.

        1. “But you cannot seriously argue that an Uber driver is not an independent contractor.”

          Legally, sure. But in fact he’s dependent on Uber for his work and has to follow their say so. For me independence means self-sufficiency, not relying on others for work and not having to pay others a tribute when you do work.

          Driving is an interesting sector in the job market, It’s apparently the biggest employer of ‘unskilled’ men. I think regulation will have a lot of resonance with these working class (sometime) voters. Uber drivers have already shown a surprising amount of labor militancy. It’s inevitable given that the rest of the economy is regulated.

          1. “Not relying on others for work”? So will you just do some “work” that no one asked you to do and be paid to do it? By whom?

            1. ” So will you just do some “work” that no one asked you to do and be paid to do it? By whom?”

              Making things and selling them or trying to sell them is not that unusual.

  10. I cannot imagine how this law could possibly pass constitutional muster. Here’s a list of people the exempt:

    these exemptions include: insurance agents; medical professionals such as physicians, dentists, podiatrists, psychologists, and veterinarians; licensed professionals such as attorneys, architects, engineers, private investigators, and accountants; financial advisers; direct sales salespersons; commercial fisherman

    I don’t think there is a single job listed here that is anywhere close to being as “independent” as an Uber driver.

    In fact, almost every single one of these fails all three of the legs of the test.

    I know the law was crafted with the specific intent of killing Uber and Lyft, but this is ridiculous. We should demand better from our government. Whatever your opinion of this sort of work and the value or evil of these specific companies, there’s no way we should tolerate our government simply deciding which companies should exist and which should not.

    1. “I don’t think there is a single job listed here that is anywhere close to being as “independent” as an Uber driver. ”

      Their drivers are totally, absolutely, completely dependent in the software Uber provides them with.

      All these other fields you mention can be done without having to install anyone’s software.

      1. Does anyone force them to join Uber in the first place? If not they agree to use the software to be able to work. This is such a stupid argument on your part.

        1. “This is such a stupid argument on your part.”

          Agreeing to use software doesn’t make one independent.

          1. No, he’s right. “they are dependent on the software” is a stupid argument. They are equally dependent on cellular technology.

            That’s a non-starter. The Uber/Lyft software is simply the means by which they communicate “here’s a job” and the driver says “I’ll take it.”

            The driver provides a service, Uber/Lyft collects the money and pays them. They provide other services for their cut – but that’s beside the point.

            The point is, you can jump on and become a driver today. And you can drive only on Fridays from 5-7pm if you want. You don’t even have to ask permission for those hours. You just decide “that’s when I’m gonna do it”.

            1. “The point is, you can jump on and become a driver today. And you can drive only on Fridays from 5-7pm if you want. You don’t even have to ask permission for those hours.”

              This is the much vaunted flexibility that’s bandied about here. And I agree. It’s independence, I have trouble with. The regulations will likely be more about amenities like pay, holidays, sick leave and the like, as mentioned in the article. The drivers are likely to get a bigger cut of the pie. As I said, 30% was the figure I’ve seen quoted if memory serves, which is likely only a ceiling.

    2. Well, not just them. Huge swaths of the “gig” economy were affected. Journalists included. I don’t think this will pass muster as a bill of attainder.

      1. That’s what makes the government’s actions so reprehensible.

        They are running around exempting everyone who asks … except the targeted companies.

        This, of course, strips their motives bare. The courts should be able to recognize this pretty easily.

        But the people should demand better from their government without waiting for some dude in a robe to rein them in.

  11. “We should demand better from our government.”

    We could start by demanding less from them.

    1. Works for me!

      “less is more” has been around for a long, long time.

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