California Sues Uber and Lyft to Classify Drivers as Employees

The suit threatens to upend the business models of Uber and Lyft, which view themselves as tech-y intermediaries between people who want rides and people willing to drive them. An analysis by Barclays estimates that treating California drivers as employees would cost Uber $506 million and Lyft $290 million annually; neither company is profitable.

THE STATE OF California and three of its biggest cities have sued Uber and Lyft for misclassifying hundreds of thousands of drivers as independent contractors, in violation of a new state law. The suit, under a law known as Assembly Bill 5, argues that drivers are company employees, entitled to minimum and overtime wages, paid sick leave, health benefits, and access to social insurance programs like unemployment.

The lawsuit also brings to a head simmering tensions of “gig economy workers, who have been at the front lines of the coronavirus  pandemic. Workers at firms that offer shopping or delivery, such as Instacart and Postmates, have complained that their low wages, determined and managed by platform algorithms, don’t accurately reflect the risks they’re taking to deliver people and goods during a public health crisis.

Elsewhere, both companies are reporting huge drops in use of their ride-share service during the pandemic – adding to the precariousness of the business model now that it is under suit as well. Stay tuned . . .