Lyft & Uber Are Still Operating, Despite California’s AB-5
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Just hours after Lyft announced that its ride-hailing service in California will be suspended at 11:59 PM PT on Thursday 20, 2020, as a result of being ordered by California Superior Court Judge Ethan Schulman to classify Lyft drivers as employees rather than independent contractors, Lyft and Uber were granted an emergency stay by the California Court of Appeals, averting their planned shutdown. Lyft and Uber will now have until October to convince the court that these drivers are not employees.
An open letter from 153 economists and political scientists in California was submitted to Governor Gavin C. Newsom and All Members of the California State Legislature, in italics, below:
In 2019, California Assembly Bill 5 was passed to regulate the use of independent contractors in a variety of activities.
By prohibiting the use of independent contractor drivers, health care professionals, and workers in other critical areas, AB-5 is doing substantial, and avoidable, harm to the very people who now have the fewest resources and the worst alternatives available to them.
We, the undersigned Ph.D. economists and political scientists, call for the immediate suspension of AB-5.
This is all resulting from California Assembly Bill 5 (2019), aka. California AB 5, explained by the excerpt from wikipedia, in italics, below:
California Assembly Bill 5 or AB 5 is a state statute that expands a landmark Supreme Court of California case, Dynamex Operations West, Inc. v. Superior Court (“Dynamex”). In that case, the court held that most workers are employees, ought to be classified as such, and the burden of proof for classifying individuals as independent contractors belongs to the hiring entity. AB 5 entitles workers classified as employees to greater labor protections, such as minimum wage laws, sick leave, and unemployment and workers’ compensation benefits, which do not apply to independent contractors. Concerns over employee misclassification, especially in the gig economy, drove support for the bill, but it remains divisive.
The law codifies and expands the scope of the ABC test, which was first established by the Commonwealth of MassachusettsLegislature on July 19, 2004. The test includes a three-prong assessment to determine if a worker was misclassified: (A) that “the individual is free from direction and control,” applicable both “under his contract for the performance of service and in fact,” (B) that “the service is performed outside the usual course of business of the employer,” and (C) that the “individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.” 
In response to the passage of AB 5, several industries began to lobby Sacramento for exemptions. Uber and Lyft made one such attempt on behalf of the rideshare industry, but their efforts were denied. The industries that were granted exemptions tended to have the following characteristics:
- the independent contractors had the wherewithal to set or negotiate their own prices
- the independent contractors had access to direct communication with customers
- the independent contractors earned at least twice the minimum wage [better source needed]
Uber and Lyft both said they plan to continue “business as usual” and are refusing to reclassify their drivers as employees, which potentially exposes the gig-work companies to litigation from state agencies. Uber, Lyft, and DoorDash have pledged to spend $30 million each on a 2020 ballot initiative to reverse AB 5. This initiative is on the ballot for the 2020 California electionsas Proposition 22, and if it passes, then rideshare and delivery drivers will be classified as independent contractors.
Some professions are exempt from AB 5, including doctors, dentists, psychologists, insurance agents, stockbrokers, lawyers, accountants, engineers, and real estate agents, as they are seen to generally directly work with and set their prices to customers. Newspaper delivery workers will be given an extra year before compliance.
In May 2020, California Attorney General Xavier Becerra sued Uber and Lyft, alleging the ride-hailing companies have misclassified their drivers as contractors in violation of a new state law that went into effect this year. City attorneys from San Francisco, Los Angeles and San Diego have joined Becerra in the lawsuit. The suit, filed in San Francisco Superior Court, alleges Uber and Lyft have denied their workers key benefits and protections by classifying drivers as contractors rather than employees. The plaintiffs claim the decision denied workers the right to minimum wage and overtime pay, reimbursement for business-related expenses, access to unemployment and disability insurance as well as paid sick leave.
California Superior Court Judge Ethan Schulman issued his ruling on August 10, 2020, stating that Uber and Lyft must treat their drivers as employees under AB-5, as their work in the context of the “ABC test” was not outside the usual course of their business, nor was a “multi-sided platform” as Uber and Lyft had argued but simply transportation companies that fell within AB-5’s provisions. Both Uber and Lyft have stated their plan to appeal the ruling as well as seek an injunction to stay the order until the appeal is complete.
In response to the new law, Uber has made several changes to its app for drivers in California, such as allowing drivers to see destinations in advance, and removing penalties for rejecting rides. It has also started testing a new feature that allows drivers to set their own rates, in 10% increments, with the passenger seeing the lowest fare accepted by an available driver, and drivers seeing how long they will likely wait to get dispatched based on their chosen rate.
Gathered, written, and posted by Windermere Sun-Susan Sun Nunamaker More about the community at www.WindermereSun.com
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