Uber and Lyft have been facing legal pressure for allegedly committing wage theft from its drivers by misclassifying them as independent contractors instead of AB-5 employees. Today, the companies are threatening to shut down its services in California.
California’s Labor Commissioner’s Office filed lawsuits against two of the known ride-hailing apps, Uber and Lyft. The office demanded that the two companies classify their drivers under AB-5 immediately because the current classification deprives the drivers of protections, access to reimbursement of expenses, sick leave, overtime, and minimum wages, and the pandemic is making it worse. The office also wishes to recover unpaid wages, interests, and penalties.
Uber first responded by claiming that most of the Californian drivers chose to work independently and that it has already made modifications in its app to “ensure that remains the case under state law.” Lyft followed by accusing the state labor agency of botching thousands of claims that are expected to remain unprocessed, saying the issue will take years to be resolved.
Today, both companies said they may have no choice but to suspend their services in California if their appeals fail.
“If our efforts here are not successful it would force us to suspend operations in California,” said John Zimmer, Lyft’s co-founder, and president, in his statement for the second quarter of Lyft’s earnings call.
Uber’s CEO also called for a new business model that could help their drivers get the benefits they need instead of simply identifying gig workers as employees for which California Attorney General Xavier Becerra responded, “You do have to wonder, why does it that it takes 10 years […] and a lawsuit for two innovative companies to come up with a new idea on how to provide their employees with the benefits that they’re entitled to.”
Uber finds hope in the fact that California voters can vote yes on Proposition 22 in the upcoming election, which could override AB5 and let other gig economy workers stay as independent contractors.