Dara Khosrowshahi, chief executive officer of Uber Technologies Inc., speaks in an interview in Tokyo, Japan, on Wednesday, July 3, 2019.
Akio | Bloomberg | beautiful images
A California judge issued a preliminary order on Monday asking Uber and Lyft to stop classifying their drivers as independent contractors while awaiting further court processing. The order will be effective after 10 days, as the companies have requested a short stay in the appellate review process.
California Attorney General Xavier Becerra requested the restraining order as part of the lawsuit he brought in May alongside city attorneys from San Francisco, Los Angeles and San Diego. The lawsuit, filed with the San Francisco Superior Court, accuses Uber and Lyft of violating a new state law called Board Bill 5 (AB5), which was created as a way to classify workers. Contract workers are full-fledged employees and guarantee benefits from their employer. Uber and Lyft are among tech companies that have previously opposed the bill, arguing their workers enjoy the flexibility of creating their own schedules as contractors.
California officials sought a ban on alleged misclassification and workers’ compensation and civil penalties worth hundreds of millions of dollars.
Shares in Uber fell 0.8% in Monday’s trading, and Lyft’s shares fell 1.7%.
Representatives from Uber, Lyft and Becerra’s office did not immediately respond to requests for comment.
Uber CEO Dara Khosrowshahi advocated a “third way” to classify workers in a letter to President Donald Trump in March when the first round of coronavirus relief measures were being negotiated. He argued that there was a need for a way for workers to gain protection without sacrificing flexibility in contract work.
In the ruling, Judge Ethan Schulman recognized the value of flexibility that Uber and Lyft offer, writing, “The Court does not take the defendants lightly” showing that the original order can also have a negative impact. to some of their drivers, many of whom desire the flexibility to continue working as before and may have commitments that make it difficult if not impossible to become full-time employees. space. “
But Schulman wrote that Uber and Lyft’s concerns that the ban would have “far-reaching effects” were only exacerbated by the Respondent’s long and brazen refusal to comply with California law. the defendant may not be able to evade legislative duties just because their business is so big that they affect the lives of thousands. “
Schulman wrote that any impact of the ban on Uber and Lyft’s business could be mitigated as they both said “the majority of their drivers work infrequently or sporadically” and the fact that the coronavirus pandemic has “significantly reduced the need for Defendant’s services.”
“Now, when the Defendant’s number of drivers is at an all-time low, it may be the best time (or least worst) time for the Respondent to change their way of doing business. compliance with California law without causing large-scale adverse effects on their drivers, ”wrote Schulman.
However, the ruling does not end the legal battle for Uber and Lyft. Last week, the California Labor Commissioner released lawsuits against companies alleging wage theft due to misclassification. The commission seeks to recover salaries it believes owed drivers who are currently classified as contractors. The lawsuits were filed with the Alameda County Superior Court.
This story is evolving. Check back for updates.
Subscribe to CNBC on YouTube.
VIEW: Deliveries are risking their lives to give people groceries during the coronavirus era – here’s what for them