On August 10, 2020 a California Federal Court Judge ordered Uber and Lyft to classify their drivers as employees https://www.washingtonpost.com/technology/2020/08/10/uber-lyft-ab5/ . The lawsuit filed by the State of California and various Cities demanded compliance with AB5, the January 1, 2020 statute which outlaws the classification of gig workers as independent contractors. The Court stayed enforcement of its Order for ten days to give the Defendants an opportunity to file an appeal. The California Department of Labor recently announced its intent to vigorously enforce the classification requirements set forth in AB5.
What does this mean for Uber, Lyft and “gig” workers in California? It’s too soon to know for certain, however unless the California Court of Appeals or the California Supreme Court overturn this latest ruling, Uber, Lyft and eventually other employers who classify certain workers as independent contractors are going to have to reclassify their workers. A massive reclassification would expose those companies to lawsuits for back wages and other damages, force them to alter their economic model and likely jeopardize their economic viability. This would result in an unprecedented reshuffling of economic resources in the State of California. Uber and Lyft have threated to leave the state of California if the Order goes into effect. News reports suggest that they are also considering setting up “franchise models” for their drivers. Proposition 22, which is on the November ballot seeks to allow the gig economy to continue. As such, California voters may have a say in this issue, though it goes without saying that the Courts will have the opportunity to continue to weigh in and may have the final say.
This blog is written as of August 17, 2020. Recommendations and legal requirements are changing rapidly, so please continue to review our legal updates or review postings on relevant government websites.
All blogs on this site are for educational purposes only, do not constitute legal advice or opinion, and should not be applied to your situation, or any specific situation, without consultation with counsel. Strategy Law, LLP does not provide any legal advice concerning any matter discussed in a blog except upon formal engagement including, without limitation, execution of Strategy Law, LLP’s formal legal services agreement, and with respect to specific factual situations. No blog constitutes a guaranty, warranty, or prediction regarding the result of any legal matter discussed in the blog