Uber and Lyft must reclassify drivers as employees, US court finds

Michael Cogley
·2-min read
The ride-hailing giants are battling a court ruling in California - Mike Blake/Reuters
The ride-hailing giants are battling a court ruling in California - Mike Blake/Reuters

Ridesharing giants Uber and Lyft are battling against a court ruling that could potentially undermine their business models.

A California appeals court unanimously ruled that both companies must reclassify their drivers as employees in the state.

The court’s ruling will not take effect until after a company-sponsored ballot on November 3 that will give voters the opportunity to decide the future status of gig economy workers.

Uber and Lyft’s case came about after the state of California passed a law called Ab5, which was introduced for the purpose of reclassifying app-based workers, like the ones working in ride-hail and food delivery businesses. The law’s purpose was to ensure the workers were deemed to be employees and as a result would be entitled to benefits like unemployment insurance and minimum wage.

In August, a judge ruled with the state after it sued Uber and Lyft for not complying with the new law. The appeals court backed up that ruling on Thursday.

Watch: Appeals Court Upholds Ruling Classifying Lyft, Uber Drivers As Employees

Both companies said they were considering all legal options and encouraged constituents to vote “yes” on their proposition.

Uber said that if Proposition 22 loses, drivers will be prevented from working as independent contractors, which would put “hundreds of thousands of Californians out of work”. The ride-hailing giant also said it would likely shut down ridesharing throughout the state.

Uber has sent out in-app notifications to drivers in recent weeks, stating that it would only be able to hire 30pc of them as employees if the new rules were imposed on them, the Wall Street Journal reported. It also told them that prices would rise by between 20pc and 100pc.

In July, Uber’s five-year battle over the treatment of gig economy workers reached the Supreme Court in Britain. The Californian company is pushing to overturn a ruling that determined its drivers should be entitled to national minimum wage and paid holiday.

Last month, the company won the right to stay open in London following a three-year legal battle with transport authorities, after a court ruled that “historical failings” should not force it to shut.​

Watch: Uber Competes with Automakers for Commuter Dollars