The state of California has been working for several years to ensure that people who drive for Uber, Lyft and other ride-hailing companies are properly classified. There had long been an argument that these drivers, and other workers in the “gig economy,” who pick up work from a platform, are actually employees of the companies they get work through.
Meanwhile, Uber and Lyft have argued that they have no employment relationship with their drivers. Instead, they said that they merely provide a platform for willing drivers and riders to connect with one another. The drivers are independent contractors, they argued. The riders, not the ride-hailing platform, should be considered the hiring entity for the drivers.
As you may have heard, a new state labor law, Assembly Bill 5, took effect earlier this year. It makes clear that gig economy workers who earn money from platforms are indeed employees of that platform unless certain tests are met. An important test is whether their work is “outside the usual course of the hiring entity’s business.”
The issue is extremely important to gig economy workers because employees are entitled to many benefits and job protections that independent contractors are not. For example, employees are entitled to the minimum wage and the overtime premium of 1-1/2 times their regular rate for all hours worked beyond 40 in a given work week. Employees are also entitled to other protections and benefits including:
- Workers’ compensation insurance
- Unemployment insurance
- Employer contributions to payroll taxes
- Employer reimbursement for job-related expenses
- Paid rest breaks
- The right to organize
- Protection from discrimination
- Employer-provided health insurance and other voluntary benefits
California’s attorney general has already brought at least two lawsuits in an attempt to force Uber, Lyft and other companies to comply with Assembly Bill 5 and classify their workers as employees. Now, the California Labor Commissioner has filed wage theft lawsuits against the ride-hailing platforms.
This new group of lawsuits are an attempt to recover money for the drivers’ unpaid wages, overtime and breaks, along with expense reimbursements, other damages, and penalties for violating state labor laws.
If back wages, damages and penalties are recovered through the litigation, the money will be distributed to the nearly 5,000 workers who have filed wage complaints with the Labor Commissioner since April 2017.
The gig economy giants are supporting a new ballot initiative, Proposition 22, that would overturn Assembly Bill 5 and allow the companies to continue to classify the workers as contractors. According to the Courthouse News Service, the companies have spent at least $110 million in support of the effort, compared to only $1.15 million raised by opponents of the measure.