- California's labor commissioner announced Wednesday that her office is suing Uber and Lyft, claiming the companies are stealing wages from drivers by "willfully misclassifying" them as contractors instead of employees.
- The suit alleges that Uber and Lyft have failed to pay drivers minimum wage, sick pay, unemployment, and other benefits guaranteed to employees under state law.
- AB-5, California's hotly debated gig economy law, created stricter requirements for companies seeking to designate workers as independent contractors.
- California's agency that oversees ride-hailing companies ruled that drivers are employees under the law, but the companies have refused to reclassify drivers, and the issue is now at the center of multiple lawsuits.
- Visit Business Insider's homepage for more stories.
The heated legal battle between California and ride-hail giants Uber and Lyft ratcheted up another notch this week with the state's labor commissioner announcing that she plans to take the companies to court over their classification of drivers.
Commissioner Lilia Garcia-Brower's office said in a press release Wednesday that it plans to file a lawsuit against the companies, arguing that they are "committing wage theft by willfully misclassifying drivers as independent contractors instead of employees."
In a letter to Uber and Lyft drivers alerting them to the lawsuit, Garcia-Brower's office said that it's seeking to force the companies to reclassify drivers as employees and reimburse them for wages and other benefits that they would be entitled to as employees under state law.
That list includes a wide variety of payments that Uber and Lyft have historically not paid to drivers, such as minimum wages based on time drivers spend using the app (not just driving passengers), overtime, sick pay, and business expenses.
"The vast majority of California drivers want to work independently, and we've already made significant changes to our app to ensure that remains the case under state law," an Uber spokesperson told Business Insider, adding that the company hasn't been served with the lawsuit yet and therefore hasn't been able to review its specific claims.
A Lyft spokesperson told Business Insider: "The state labor agency has botched thousands of claims. They know they don't have the ability to process these claims, so they sent them into a legal abyss, where they know it will take years to resolve them."
California's landmark gig work law, AB-5, which went into effect this year, raised the bar companies must clear in order to consider workers as independent contractors, spurring a major battle between regulators and Uber and Lyft over whether drivers meet that bar.
California's Public Utilities Commission, the agency responsible for overseeing ride-hail companies, dealt a significant blow to the companies earlier this year when it ruled in June that drivers are considered employees under AB-5. In May, a group of attorneys general from the state — in Los Angeles, San Francisco, and San Diego — also sued Uber and Lyft over the issue.
Uber and Lyft have previously argued that AB-5 doesn't apply to them and have aggressively defended their classification of drivers by claiming that drivers prefer to work as contractors.
Unlike their employee counterparts, contractors aren't guaranteed certain benefits like as healthcare and paid sick leave, and Uber and Lyft aren't bound by certain labor regulations around minimum wage payments or required pay payroll taxes for those workers, which feed into programs like unemployment insurance.
Driver advocacy group Rideshare Drivers United, which has been rounding up driver wage theft accusations, claimed that Uber and Lyft owe more than $1.3 billion in payments to drivers in California.
The debate over what wages and benefits gig economy companies should be on the hook for (versus workers or taxpayers) has intensified in recent months as more states and cities start cracking down on companies like Uber and Lyft. Massachusetts filed a similar lawsuit last month, while New York city imposed the country's first minimum wage for ride-hail drivers and Seattle has sought to do the same.
Axel Springer, Insider Inc.’s parent company, is an investor in Uber.
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