San Francisco Superior Court Judge Ethan Schulman ruled on Monday that Uber and Lyft may no longer classify California drivers as independent contractors. The court granted the state and city plaintiffs’ preliminary injunction, meaning that the companies’ drivers must be reclassified and receive job protections like minimum wage and sick leave as provided by state law.
California Attorney General Xavier Becerra and the city attorneys for San Francisco, Los Angeles, and San Diego brought the suit against Uber and Lyft in May alleging that the drivers’ current classification violated Assembly Bill 5 and provisions of the state’s Unfair Competition Law. They moved for a preliminary injunction to change the drivers’ classification, and to bar Uber and Lyft from violating provisions of the Labor and Unemployment Insurance Codes and wage orders of the Industrial Wage Commission in late June.
The defendants met the preliminary injunction with great opposition and several motions of their own, including a motion to stay the litigation while the Ninth Circuit reviews Uber’s constitutional challenge to A.B. 5 and until Californians vote on Proposition 22 in November, a ballot measure that would exempt certain companies from A.B. 5. The defendants also filed a demurrer and a motion to compel arbitration. The court denied each of these as “groundless,” concluding, that the defendants “are not entitled to indefinite postponement of their day of reckoning.”
The court agreed with the plaintiffs, finding that drivers are indeed employees under A.B. 5, which took effect earlier this year. The law, which codified the California Supreme Court’s ruling in Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018), was intended to “broaden the definition of an employee,” the court noted.
Uber and Lyft could not satisfy each element of the applicable three-pronged test, including demonstrating that their drivers’ duties are “outside the employer’s regular business.” Thereby, they failed to prove that their drivers are not employees under the new law.
Judge Schulman wrote that the ride-sharing defendants “stoutly deny reality,” by contending that they “are not in the business of transporting passengers for compensation” to avoid the imposition of A.B. 5. The court explained that according to the defendants’ “circular reasoning,” they are technology companies whose only “employees” are tech workers.
The court declined this argument, instead determining that if it adopted the defendants’ view of the law, “the rapidly expanding majority of industries that rely heavily on technology could with impunity deprive legions of workers of the basic protections afforded to employees by state labor and employment laws.” The injunction requiring reclassification is set to take effect ten days from its August 10 issuance, pending appellate review.
The plaintiffs are represented by the California Attorney General’s Office and the San Francisco, Los Angeles, and San Diego City Attorneys. Lyft is represented by Munger Tolles & Olson LLP, and Keker Van Nest & Peters LLP. Uber is represented by Gibson Dunn & Crutcher LLP.