Uber and Lyft defended a lawsuit filed by California and San Francisco, Los Angeles and San Diego on Thursday, accusing the companies of failing to comply with a law regulating their drivers as employees.
A judge said Thursday that he would likely "within a few days, not weeks," decide whether to tell Uber Technologies Inc. and Lyft Inc. to immediately comply with a California law in an closely watched case that would classify their drivers as employees could hit the business models of the hail giants.
The pending decision by Judge Ethan Schulman of the San Francisco County Superior Court The lawsuit filed by the California Attorney General and San Francisco, Los Angeles, and San Diego City Attorney General for an immediate injunction asking the two companies to reclassify their drivers could have far-reaching implications for the gig economy.
Schulman mentioned several times that he was having difficulty compensating for the damage that an immediate disposition could bring, especially after Lyft
Attorney Rohit Singla described it as a “dramatic” and unprecedented action that would be burdensome for companies and could result in hundreds of thousands of drivers losing “income opportunities”.
"I feel like I'm asked to jump into a body of water without really knowing how deep it is, how cold the water is, and what will happen if I get in," said the judge during the almost three – Hourly hearing in San Francisco that was conducted virtually.
AB 5, which entered into force on January 1, codified a 2018 Supreme Court ruling in California. The ruling, known as Dynamex, passed an "ABC test" that states that workers can only be considered contractors when they control their work. if their duties do not fall within the normal scope of a company; and if they "work in an independently established trade, profession or business".
Uber attorney Theane Evangelis argued that some changes the company has made since the entry into force of AB 5, including the ability for drivers to set their own tariffs to a limited extent, ensure that the company can pass the ABC test.
When AB 5 was adopted, it was generally viewed as a threat to the gig economy business model, which relies on independent contractors who are not guaranteed guaranteed minimum wages or benefits.
The lack of driver benefits became even more apparent during the coronavirus crisis when the demand for trips amid widespread barriers fell. Drivers had not paid for free time or employer-supported health care during a pandemic. Many were looking for unemployment benefits.
"What we think is dramatic is that these workers are systematically denied a wide range of worker protection measures and are harmed by these practices," said Matthew Goldberg, vice attorney general for the San Francisco law firm.
In their lawsuit, the attorney general and city attorneys list the companies' failure to pay unemployment insurance taxes and other taxes for the state's social security programs.
Goldberg announced on Thursday that the two companies together have more than $ 11 billion in cash reserves.
and Lyft argued that they would only have to comply with AB 5 after California residents voted on Proposition 22, an initiative that the companies supported and that will take place in November in the state vote. The aim is to define hail and delivery drivers as independent contractual partners and to define specific work and wage regulations for app-based companies.
Companies often say they offer flexibility to drivers, and Uber and Lyft lawyers made the same argument on Thursday.
San Francisco City attorney Dennis Herrera said in a statement after the hearing: “There is no rule that prevents these drivers from continuing to have the flexibility they currently enjoy. Proper classification as an employee does not change this. "
Uber declined to comment on Thursday. Lyft did not immediately respond to a request for comment.
Uber and Lyft are also facing other lawsuits regarding the classification of workers, including those filed by the California Labor Commissioner this week accusing the two giants of wage theft, "by deliberately misclassifying drivers as independent contractors instead of workers ". The lawsuits filed by Lilia Garcia-Brower against each company before the Supreme Court of Alameda County on Wednesday are aimed at wages, damages, and penalties, including for non-compliance with minimum wages, breaks, overtime pay, and more.
According to Nicole Moore, a Los Angeles-based organizer at Rideshare Drivers United, more than 5,000 drivers have submitted wage claims to the state. "You can't really overlook claims of $ 1.35 billion," she said in an interview. In a letter to the drivers on August 5, the California Department for Enforcement of Labor Standards announced that these claims would be dismissed by the state because they are now suing the companies and claiming these wages on behalf of the drivers.
See: Uber's delivery business outperforms its core business as the pandemic drives profits higher
The Thursday hearing took place on the same day that Uber reported that it lost $ 2 billion in the second quarter, as trips decreased 67% year-over-year. Lyft is expected to publish its results next week.