California Sues Uber, Lyft For Worker Misclassification

The state of California, via Attorney General Xavier Becerra, along with Los Angeles, San Francisco and San Diego City Attorneys sued Uber and Lyft over driver misclassification. The state claims that classifying drivers as independent contractors violated the law, including the recently-enacted AB-5 and California’s Unfair Competition Law. Becerra and the City Attorneys claim that the companies’ misclassification “deprives workers of critical workplace protections such as the right to minimum wage and overtime access to paid sick leaves, disability insurance, and unemployment insurance.”

“Uber and Lyft claim their drivers aren’t engaged in the companies’ core mission and cannot qualify for benefits,” Becerra said. “Sometimes it takes a pandemic to shake us into realizing what that really means and who suffers the consequences. Uber and Lyft drivers who contract the coronavirus or lose their job quickly realize what they’re missing. But it’s not just these workers who lose. American taxpayers end up having to help carry the load that Uber and Lyft don’t want to accept. These companies will take the workers’ labor, but they won’t accept the worker protections. California has ground rules with rights and protections for workers and their employers. We intend to make sure that Uber and Lyft play by the rules.” 

The lawsuit alleges that the companies treat their workers as independent contractors when they should qualify as employees. As a result, these companies are “evading legal obligations such as minimum wage, overtime, payroll taxes, and workers’ compensation insurance.” The companies claimed that classifying drivers as independent contractors affords the drivers flexibility. The state disagreed, believing the companies “rob workers of critical protections in order to benefit their own bottom lines and create billions of dollars in private wealth for their venture capital investors.” The harm, the state alleged, has only become more apparent during the COVID-19 pandemic; there is less demand for drivers and drivers do not have the security of these employment protections. Uber was aware of this and asked for the government’s help during this crisis. Uber and Lyft did expand sick leave as a result of the pandemic.

“These companies are headquartered in San Francisco. We are going to police our own to ensure the law is followed, workers are protected, and the marketplace is fair,” San Francisco City Attorney Dennis Herrera said. “We have been building this case for months in partnership with the California Attorney General and our counterparts in Los Angeles and San Diego. Uber and Lyft are breaking the law. We are going to put a stop to it. Uber and Lyft claim that properly classifying drivers as employees is incompatible with flexibility. That is a lie. There is no legal reason why Uber and Lyft can’t have a vast pool of employees who decide for themselves when and where they work – exactly as drivers do now. These companies simply don’t want to do it. Uber and Lyft are selling a lie. They are lying to the public and lying to their drivers.”

“The state Supreme Court, the Legislature, and the Governor have all acted to require these billion-dollar companies to abide by the same basic laws that other employers — big and small — follow in California,” Assemblywoman Lorena Gonzalez, author of Assembly Bill 5, said. “No corporation, no matter how powerful or rich they are, should be able to exempt themselves from providing basic workplace protections like minimum wage, social security and unemployment insurance. It makes sense that our state’s highest law enforcement officials are now stepping in.”

This is not the first time the companies have faced suit over driver misclassification. Prior actions include a suit in November against Lyft. California sought to dismiss a suit trying to block AB-5 earlier this year.

Becerra has sought to permanently enjoin defendants from engaging in actions that violate these laws and to prevent them from further misclassification, and damages, including a civil penalty of $2,500 per violation of the UCL and an additional $2,500 for violations against senior citizens and people with disabilities. The total fine could reach millions of dollars.

The lawsuit was filed in the Superior Court of San Francisco.