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CA appeals court upholds ruling that Uber and Lyft must classify drivers as employees

LAX AIRPORT, CA - AUGUST 20: Passengers connect with drivers at the Rideshare Lot at LAX as Uber and Lyft drivers held a moving rally as part of a statewide day of action to demand that both ride-hailing companies follow California law and grant drivers basic employee rights and to denounce the corporations efforts to avoid their responsibilities to workers. Uber and Lyft threatened to suspend services in California Thursday night but a court granted Uber and Left a stay to a preliminary injunction requiring both rideshare companies to reclassify their drivers as employees, meaning the rideshare companies will not suspend service in California tonight as they threatened. Los Angeles on Thursday, Aug. 20, 2020 in LAX Airport, CA. (Al Seib / Los Angeles Times

Uber and Lyft must classify their drivers as employees, an appellate court ruled yesterday evening. However, the decision will be stayed for 30 days after the court issues the remittitur, which has not happened yet. That means depending on how ballot measure Proposition 22 goes, this case may not end up being the deciding factor in how Lyft and Uber classify their drivers in California.

Throughout the case, Uber and Lyft have argued that reclassifying their drivers as employees would cause irreparable harm to the companies. In the ruling today, the judge said neither company would suffer any “grave or irreparable harm by being prohibited from violating the law” and that their respective financial burdens “do not rise to the level of irreparable harm.”

Additionally, there is nothing in the preliminary injunction, according to the judge, that would prevent Uber and Lyft from offering flexibility and independence to their drivers. Lastly, the judge said Uber and Lyft have had plenty of time to transition their drivers from independent contractors to employees, given that the key case in passing AB 5, the gig worker bill that spurred this lawsuit, was decided in 2018.

“This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22,” Lyft spokesperson Julie Wood said in a statement to TechCrunch.

Prop 22 is a ballot measure in California that seeks to keep rideshare drivers and delivery workers classified as independent contractors. The measure, if passed, would make drivers and delivery workers for said companies exempt from a new state law that classifies them as W-2 employees. If passed, app-based transportation and delivery workers would be entitled to things like minimum compensation and healthcare subsidies based on engaged driving time.

Meanwhile, Lyft says it’s exploring all of its legal options, which may include appealing to the California Supreme Court. Uber, similarly, is considering its appeal options.

“Today’s ruling means that if the voters don’t say Yes on Proposition 22, rideshare drivers will be prevented from continuing to work as independent contractors, putting hundreds of thousands of Californians out of work and likely shutting down ridesharing throughout much of the state,” an Uber spokesperson told TechCrunch. “We’re considering our appeal options, but the stakes couldn’t be higher for drivers—72% of whom support Prop 22—and for the California economy, where millions of people are jobless and another 158,000 just sought unemployment support this week.”

The judge’s decision comes after California Superior Court Judge Ethan Schulman granted a preliminary injunction in August to force Uber and Lyft to reclassify its drivers as employees. Uber and Lyft appealed the decision, but the appeals court has now affirmed the decision from the lower court.

The lawsuit was brought forth by California Attorney General Xavier Becerra, along with city attorneys from Los Angeles, San Diego and San Francisco in May. They argued Uber and Lyft gain an unfair and unlawful competitive advantage by misclassifying workers as independent contractors. Then, in June, the plaintiffs filed a preliminary injunction seeking the court to force Uber and Lyft to reclassify their drivers. In August, Judge Schulman granted it.

“While this legal victory today is directed at two companies, this fight is far broader,” Gig Workers Rising said in a statement. “This is about the future of work in this country. This is about securing good jobs with real benefits for generations to come. If Uber and Lyft are successful in passing Prop. 22 and undo the will of the people, they will inspire countless other corporations to adapt their business models and misclassify workers in order to further enrich the wealthy few at the expense of their workforce.”

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