A judge has ruled that Uber and Lyft must label their drivers as employees rather than independent contractors like the companies have been doing since their inception. The ruling, which came from a California judge after a lawsuit was filed there in May alleging that they were misclassifying their drivers, will not immediately go into effect for at least 10 days as Judge Ethan Schulman will allow both Uber and Lyfy a chance to fill an appeal.
The lawsuit was first filed after the state adopted new labor laws, referred to as AB5. The new set of guidelines came into place at the start of 2020 as its verbiage made it difficult for companies their to get away with calling their workers independent contractors. With the coronavirus pandemic placing an incredible strain on the economy and drivers of both ride-sharing companies expressing their struggles, most of which stemmed from not having benefits or workers compensation offered because they were not classified as employees. The COVID-19 outbreak left many drivers without anyone to drive around as the country went into lockdown mode and the industry is still recovering as states slowly progress through their reopening phases.
In the wake of the pandemic, both companies, including DoorDash, have invested more than $100 million in seeking to overthrow the AB5 ruling, according to The Guardian. After it went into effect, The Guardian shares that Uber allowed its drivers to set their own rates as a way of showing the courts that its drivers operate as contractors.
California is the home of both companies, as well, and the state is considered their largest market. This ruling is expected to have a dramatic impact on the company not just with its California employees, for for all of their drivers across the country. In The Guardian's article documenting the news, an associate professor of law at the University of California, Venna Dubal, called this a "huge" step in labor rights. About a week before this ruing, the Pennsylvania Supreme Court ruled in favor of a Philadelphia Uber driver who said he was not self-employed and should be eligible for unemployment compensation. This went down with a 5-2 decision and apparently may have been the first step in giving drivers more support moving forward.
Uber, which is based in San Francisco, was founded in March 2009 and serves 69 countries. Meanwhile, Lyft, which also hails from the Bay Area, developed three years later after its competitor and serves only the United States and Canada.