Ride-Hailing Companies exempt from classifying drivers as employees, but not exempt from California labor lawsuits

San Francisco, CADespite winning Proposition 22, which means that Uber, Lyft and other ride-hailing companies are exempted from AB5 and drivers are reclassified as independent contractors, the companies are not immune to California labor lawsuits.

Proposition 22 Opposition

Proposition 22, bankrolled mainly by Uber, goes into effect December 17, but the California Labor Commissioner's Office and numerous attorneys hold Uber, Lyft and others liable for how they treated workers before the ballot measure goes into effect. They aren’t about to forgive driver misclassification and unpaid wages violations, which assemblywoman Lorena Gonzalez sees as wage theft.  “I do believe they are on the hook for years of past wage theft to the drivers,” Gonzalez said. “Sure, Prop. 22 was enacted, but before that, they were breaking the law.” (Ms. Gonzalez authored AB5, the California labor law that makes it harder for companies to classify workers as independent contractors, and which the companies are accused of violating. It went into effect January 1, 2020.)

Labor experts and opponents of Prop 22 said its passage is a huge loss for workers, according to the Los Angeles Times. California gig workers would have been classified as employees per Assembly Bill 5, with all the additional benefits that come with that status, if Prop 22 failed. But it didn’t. “Drivers will continue to be paid less than the minimum wage if all their work time is counted; and they will be reimbursed for less than half of their business expenses. That’s a big price to pay,” UC Berkeley labor economist Michael Reich said in an email to the LA Times.

Prop 22 Injunction

An injunction has forced the ride-hailing companies to treat its drivers as employees. In August 2020, a California court ordered Uber and Lyft to reclassify their drivers in the state as employees. The companies retaliated this ruling by threatening to shut down and they appealed. On October 22, the appellate court judge decided that the injunction restraining Uber and Lyft from classifying their drivers as independent contractors was valid.

"Uber and Lyft have used their muscle and clout to resist treating their drivers as workers [who are] entitled to those paycheck and benefit protections," Attorney General Xavier Becerra said in a statement after the ruling, and reported by CNN. "It's time for Uber and Lyft to play by the rules."

In theory, Prop 22 means that ride-hail and delivery drivers would continue to be treated as independent contractors, along with some concessions on benefits such as minimum wage earnings. But a California appeals court holds the injunction, rebuffing Uber's and Lyft's argument that Prop 22 meant the ruling needed another look. The companies can challenge the injunction at the trial court, where the case is now set to return, explained Law360.

John Coté, a representative of the San Francisco City Attorney's Office, is “pleased with the decision and we look forward to continuing to make our case on behalf of the people,” he told Law360. "Drivers and the public deserve restitution and penalties for Uber and Lyft's misconduct…We are going to continue with our case until justice is served."

The cases are People of the State of California v. Uber Technologies et al., and People of the State of California v. Lyft Inc. et al., Case Numbers A160706 and A160701, in the California Court of Appeal, First Appellate District.

What all of this litigation might boil down to is one of two scenarios. Uber, Lyft and other gig workers reap the status, benefits and protections of employees. If not, can they make a living wage with decent working conditions as independent contractors, along with collective bargaining rights to ensure they get basic rights from these companies?