A California court ruled that Uber and Lyft must classify their drivers as employees in a preliminary injunction issued on Monday. However, the court has stayed the injunction for 10 days to allow the ride-hailing service providers to appeal the decision.
Uber and Lyft currently treat their drivers as independent contractors.
In addition, the Superior Court of the State of California County of San Francisco denied the companies attempts to dismiss the case and stay proceedings.
The preliminary injunction has come after the California Attorney General and City Attorneys filed for a preliminary injunction in June alleging that the companies’s misclassification of drivers caused immediate and irreparable harm to the state and deprived workers of critical workplace protections.
In May, California’s Attorney General and a coalition of city attorneys including that of Los Angeles, San Diego, and San Francisco, filed a lawsuit against Uber and Lyft claiming that the companies wrongfully classified their drivers as independent contractors in violation of a state law.
The law, Assembly Bill 5, requires companies to treat their workers as employees instead of contractors if they control how workers perform tasks or if the work is a routine part of a company’s business. The law took effective on January 1, 2020.
According to the lawsuit, misclassification of drivers by Uber and Lyft deprives workers of critical workplace protections such as the right to minimum wage and overtime, and access to paid sick leave, disability insurance, and unemployment insurance.
A study by the University of California, Berkeley found that worker misclassification by Uber and Lyft resulted in the companies being able to avoid an estimated $413 million in contributions over a five-year period to California’s State Unemployment Insurance Trust Fund.
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