San Diego and California’s Lawsuit Against Uber and Lyft, Explained

Republicans who long hated AB 5, the law limiting when employers can classify workers as independent contractors, have argued for the last two months that the law should be put on hold during the coronavirus pandemic.

San Diego City Attorney Mara Elliott, along with California Attorney General Xavier Becerra and the city attorneys of San Francisco and Los Angeles, this week hit back. They’re not just enforcing the law; they’re using it to go after two of the biggest fish in the gig worker sea: Uber and Lyft. They now officially claim the drivers for those two companies should be employees with guarantees like minimum wage and sick leave. (Disclosure: My husband works for the attorney general’s office.)

Before the lawsuit filed this week in San Francisco Superior Court, Elliott had been the first city attorney in the state to sue a gig company over worker classification – though her suit against grocery delivery company Instacart was filed before AB 5 became law and was based on the Supreme Court’s Dynamex decision, which laid out a three-prong test to determine whether a company is properly classifying its workers as independent contractors.

The lawsuit this week argues plainly that Uber and Lyft violate all three prongs of the test.

“California law is clear: for the full range of protections afforded by California’s Wage Orders, Labor Code, and Unemployment Insurance Code, workers are generally presumed to be employees unless the hiring entity can overcome this presumption by establishing each of the three factors embodied in the strict ‘ABC’ test,” the plaintiffs argue. “Uber and Lyft cannot overcome this presumption with respect to their drivers.”

Some takeaways from the lawsuit:

Both sides continue to insist that the pandemic proves them right.

In her lawsuit against Instacart, Elliott’s office has argued the coronavirus pandemic makes the issues at hand more urgent: If drivers don’t have access to paid sick leave, they are likelier to work while sick, thus exposing the public to danger.

Gig companies, meanwhile, have argued that their services are needed more than ever: The public is relying on services like grocery deliveries to ensure they are adhering to stay-at-home orders.

“And now, even amid a once-in-a century pandemic, they have gone to extraordinary lengths to convince the public that their unlawful misclassification scheme is in the public interest,” plaintiffs argue in the Uber and Lyft lawsuit. “Both companies have launched an aggressive public relations campaign in the hopes of enshrining their ability to mistreat their workers, all while peddling the lie that driver flexibility and worker protections are somehow legally incompatible.”

The group Protect App-Based Drivers & Services also invoked the coronavirus in its response to the lawsuit, and said in a press release that the suit “would force more Californians out of work and eliminate access to these essential services when millions are relying on them.”

Uber endeavored to give its drivers more control after AB 5 passed.

Uber has responded to AB 5 in a number of – sometimes contradictory – ways. It has argued that the law doesn’t apply to its drivers (more on that in a moment). It has simultaneously pumped tens of millions of dollars into a November ballot measure that would exempt its drivers from the law. And, after AB 5 was signed, it implemented a number of policy changes to California drivers to show that the drivers maintained control over their schedule and rates – one of the three prongs of the test.

What is a rideshare company’s ‘usual course of business’?

Another prong of the ABC test deals with whether a worker is performing work within the company’s “usual course of business.” This is why, for example, the law has hit freelance journalists so hard: Newspapers and other publications perform journalism as their core function, so contracting freelance journalists who perform that same function fails the test. (Journalists got an exemption in the law allowing them to do 35 separate submissions for a publication.)

Uber has argued at times that the law doesn’t apply to it because it’s merely a technology platform that connects drivers with riders. In this argument, the drivers aren’t a core part of that technology marketplace. Instacart has made a similar argument in its worker classification lawsuit.

The city attorneys’ lawsuit argues that the drivers don’t just fall within Uber and Lyft’s “usual course of business” – they are the business.

Uber’s prospectus for its 2019 IPO also describes how Drivers, and the labor they furnish providing on-demand rides, are the lifeblood of its business strategy.  Uber does not mince words: “If we are unable to attract or maintain a critical mass of Drivers . . . our platform will become less appealing to platform users, and our financial results would be adversely impacted . . . .  Any decline in the number of Drivers . . . using our platform would reduce the value of our network and would harm our future operating results.”  … Uber’s business model begins and ends with its Drivers.

The lawsuit argues the companies violate San Diego city ordinances.

The lawsuit contends that by failing to treat drivers as employees and thus guaranteeing them the benefits that come with employment, the companies aren’t just violating AB 5, they are also running afoul of local San Diego ordinances, including ordinances guiding the minimum wage and earned sick leave.

A new report puts a price tag on some of the plaintiffs’ claims.

The cities and state argue that Uber and Lyft don’t just harm their drivers by misclassifying them as contractors – they hurt cities and states that must pick up the tab for safety net services, and they hurt businesses that play by the rules by gaining an unfair advantage.

This week, a new report from UC Berkeley researchers drove home part of that argument with this stark finding: “If Uber and Lyft had treated workers as employees, the two [transportation network companies] would have paid $413 million into the state’s Unemployment Insurance Fund between 2014 and 2019.”

That fund is now being tapped to its limit by claims from workers laid off during the coronavirus pandemic.

Lyft told Vice that the study is off base and “ignores basic economics in an effort to achieve a predetermined conclusion that serves a political agenda, and its assumptions are wildly off. For starters, in this hypothetical reality, everyone who has chosen to drive for Lyft would have been hired by Lyft as an employee. As we’ve repeatedly said, that wouldn’t happen in the real world—instead, many, many Californians would lose the opportunity to earn by driving with Lyft.”