According to NPR, the state of California is suing Uber and Lyft for classifying their drivers as contractors, as opposed to employees. This lawsuit will test the new state law, AB5, which was intended to give gig workers like rideshare drivers more labor protections—including access to employer-sponsored health insurance.
In an effort to achieve recovery, the state is seeking penalties that could reach hundreds of millions of dollars, in addition to restitution to hundreds of thousands of rideshare drivers in California.
With the impact of COVID-19 on the rideshare industry, it has brought to light the precariousness of gig economy jobs like driving for a rideshare company. According to Xavier Becerra, California’s attorney general, rideshare companies are harming drivers and taxpayers.
Drivers who fall ill or are out of work for one reason or another are generally not protected and could lose their jobs. In regard to taxpayers, Uber and Lyft get out of paying hundreds of millions of dollars in social safety net obligations by classifying their workers as contractors.
When AB5 passed last year, the law made it harder for companies to misclassify workers at contractors. Uber and Lyft, however, have continued to argue that the law does not apply to them. Both companies have pledged to spend $90 million on a ballot initiative seeking to overturn AB5.
In response to the lawsuit, Uber had this to say: “At a time when California’s economy is in crisis with four million people out of work, we need to make it easier, not harder, for people to quickly start earning. We will contest this action in court, while at the same time pushing to raise the standard of independent work for drivers in California, including with guaranteed minimum earnings and new benefits.”
Lyft also responded: “We are looking forward to working with the Attorney General and mayors across the state to bring all the benefits of California’s innovation economy to as many workers as possible, especially during this time when the creation of good jobs with access to affordable healthcare and other benefits is more important than ever.”
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