California Attorney General Xavier Becerra, as well as Los Angeles, San Diego, and San Francisco City Attorneys, announced Wednesday that they will file a preliminary injunction in the Superior Court of San Francisco requiring Uber and Lyft to immediately end their worker misclassification. This comes after the Attorney General and the City Attorneys sued Uber and Lyft for driver misclassification in May and the California Public Utilities Commission declared that gig economy workers are employees.
Becerra and the City Attorneys alleged that this misclassification “deprives workers of critical workplace protections such as the right to minimum wage and overtime, and access to paid sick leave, disability insurance, and unemployment insurance.” As a result, these misclassified workers may be more likely to seek government funds to help support themselves, which “leav[es] taxpayers to foot the bill in lieu of big business.” They cited to a UC Berekley study found that Uber and Lyft worker misclassification “is estimated to have resulted in the companies being able to avoid $413 million in contributions over a period of five years to California’s State Unemployment Insurance Trust Fund.”
“It’s time for Uber and Lyft to own up to their responsibilities and the people who make them successful: their workers,” Attorney General Xavier Becerra said. “Misclassifying your workers as ‘consultants’ or ‘independent contractors’ simply means you want your workers or taxpayers to foot the bill for obligations you have as an employer — whether it’s paying a legal wage or overtime, providing sick leave, or providing unemployment insurance. That’s not the way to do business in California. We’re seeking a court order to force Uber and Lyft to play by the rules.”
“The exploitation has got to stop. We’re taking aggressive action to ensure these drivers finally receive the basic protections owed to all employees,” Los Angeles City Attorney Mike Feuer said. “Ridesharing has been an incredible invention, giving the public another convenient transportation option. But this need not, and cannot, come at the expense of the drivers — or the public itself, with taxpayers left to the foot the bill for key worker protections for which these defendants must pay their fair share.”
The misclassification of workers occurs when a company classifies its workers as independent contractors, which removes the company’s legal obligation to provide certain rights, such as minimum wage, overtime, payroll taxes, and insurance; thus, Becerra and City Attorneys argued that companies are incentivized to misclassify because of the financial benefit of not having to pay for these benefits, despite harm to drivers and taxpayers. Uber and Lyft have faced a multitude of lawsuits for worker misclassification both from drivers and government attorneys. California enacted legislation, AB-5, to crack down on gig economy worker misclassification, which also led to misclassification suits against these companies. Additionally, Uber and Lyft have attempted to exclude themselves from complying with AB-5 and the companies were denied a preliminary injunction in a misclassification suit.
Becerra and the City Attorneys argue that the misclassification “harms drivers, leaving workers struggling to make ends meet – with earnings hovering at or below state and local minimum wage rates,” especially in light of the COVID-19 pandemic, where drivers were essential workers; it “harms law-abiding businesses and their workers, by allowing Uber and Lyft to avoid employer responsibilities and create and unfair competitive advance” from their alleged “illicit savings”; lastly, it “harms the public” by “depriving the state of tax revenue used to provide public services, as well as rewinding the clock on hard-won workplace protections,” which has come to light because workers do not have paid sick leave during the COVID-19 pandemic, and are exposed as a result of their work and may consequently expose their family.