Uber and Lyft Want Voters, Not Regulators, to Determine Drivers’ Status

By June Bell July 14, 2020
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California Uber and Lyft Car

Who decides whether California-based drivers for Lyft, Uber and other app-based companies are employees or independent contractors? A commissioner for the state's Public Utilities Commission (PUC) recently weighed in on the contentious issue, asserting that drivers "are presumed to be employees" and therefore must be covered by workers' compensation insurance.

Gig-economy companies disagree. DoorDash, Instacart, Lyft, Postmates and Uber want their drivers classified as independent contractors, saying that gig workers value the flexibility of setting their own schedules. They're asking California voters to support Proposition 22, which would classify drivers for app-based transportation and delivery companies as independent contractors—not employees—and provide some wage guarantees and other benefits.

State officials, as well as government leaders in Los Angeles, San Francisco and San Diego, see things differently. They've sued Uber and Lyft, alleging the companies have misclassified their workers and are exploiting them by failing to provide employment benefits that independent contractors are generally not entitled to receive, such as a minimum hourly wage and state-mandated meal and rest breaks. A hearing on a preliminary injunction, which would require the ride-hailing companies to immediately reclassify their drivers as employees, is scheduled for Aug. 6.

Stepping into the Fray

Meanwhile, the PUC, a five-person board that regulates California's utilities, rail service, limousines and ride-hailing services, has stepped into the fray. In a June 9 "scoping memo"—which is not considered a formal legal ruling—a commission director wrote that the commission is tasked with overseeing app-based ride companies until a higher court, the state legislature or voters determine otherwise.

Attorneys for the ride-hailing companies fired back, claiming the PUC lacked the authority to determine the employment status of their drivers. Instead, they said, that decision should be left to the legal system.

The attorneys asked Genevieve Shiroma, who authored the PUC's memo on the matter, to clarify that her memo wasn't a decision on whether drivers are presumed to be employees under California's independent-contractor test. "Under controlling law, no such finding was or could be made by the assigned commissioner, or even by the full commission," the attorneys argued.

Drivers for ride-hailing services who believe they are misclassified as independent contractors—and as a result are entitled to overtime, minimum wage and other benefits—can file a civil suit or appeal to the California Labor Commissioner, said Roger Crawford, an attorney with Best, Best & Krieger in Ontario, Calif. "There are other avenues to address misclassification of drivers in California," he said. "It seems to me to be strange and unnecessary for the PUC to involve itself."

Legislators attempted to resolve the question last year by passing AB 5, which spelled out a three-pronged test to determine whether a worker is an employee or independent contractor. AB 5—which was backed by organized labor and took effect on Jan. 1—deems workers independent contractors when they are "free from the control and direction of the hiring entity in connection with the performance of the work"; perform work "outside the usual course of the hiring entity's business"; and are "customarily engaged in an independently established trade, occupation or business" doing the kind of work they perform for the hiring entity.

'A Fuzzy Situation'

Uber, Lyft and other on-demand providers, including food-delivery services DoorDash, Instacart and Postmates, want to exempt themselves from AB 5 under a ballot measure that California voters will consider for the Nov. 3 election. A coalition of various unions opposes it. Some Uber and Lyft drivers want to maintain independent-contractor status. Others have demanded to be categorized as employees so they will be eligible for overtime pay, sick leave and other benefits. "It's kind of a fuzzy situation as contrasted to a lot of employer-employee situations," said Martin Mattes, an attorney with Nossaman in San Francisco.

The PUC will need several months to consider, discuss and draft a response to the motion by Uber and Lyft's lawyers, which means the commission is unlikely to act before the election, Mattes said. The ride-hailing companies' goal in contesting Shiroma's memo may be to delay any PUC action until after the election, he added.

Uber recently announced a $2.65 billion deal to buy food-delivery service Postmates. Analysts said the move would bolster Uber, which also owns delivery service Uber Eats. Although people are taking fewer rides during the coronavirus pandemic, they are ordering more delivery takeout and groceries.

June D. Bell regularly writes about California labor and employment issues for SHRM.

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