On August 10, 2020, a California Superior Court Judge granted a preliminary injunction against rideshare companies Uber and Lyft requiring them to stop classifying their drivers as independent contractors violating AB5. The injunction was stayed for 10 days to give the companies time to appeal. AB5 codified the California Supreme Court’s Dynamex decision and became effective this past January. Boom Goes the Dynamex!.
The motion for a preliminary injunction was filed by California Attorney General Xavier Becerra, along with city attorneys from Los Angeles, San Diego and San Francisco. as part of a lawsuit filed in May. The suit complains that Uber and Lyft gain an unfair competitive advantage by misclassifying workers as independent contractors and are depriving drivers of the right to minimum wage, overtime, access to paid sick leave, disability insurance and unemployment insurance. Reclassifying such drivers as employees would likely cause Uber and Lyft to incur great additional expense as the drivers would become eligible for any employee benefits they offer to employees such as retirement and health plans. If the company’s don’t offer a retirement plan, it would then have to enroll them into CalSavers.
Uber and Lyft appealed the granting of the preliminary injunction in the court that issued it but that appeal was rejected on August 14. Both companies then filed for an emergency stay at the appeals court and threatened to cease all operations in California if the stay was not granted. On August 20, the appeals court granted the emergency stay of the preliminary injunction until the court hears the appeal of the grant of the injunction, provided the companies file, by September 4, a preliminary plan for complying with AB5, should they lose the appeal and Proposition 22 (Prop 22) does not pass in November. Arguments in the case are set for mid-October.
Uber and Lyft (along with DoorDash and Postmates) were successful in getting Prop 22 on the November ballot. Prop 22 is a referendum to keep rideshare and delivery drivers as independent contractors. That proposition would create a third classification of workers and change the California Labor laws to grant drivers certain protections, including a wage of 120% of minimum wage, thirty cents per mile reimbursement for expenses, a healthcare stipend, and certain automobile and accident insurance.
So Prop 22 and AB5 may converge this Fall as It is possible that the appeals court could uphold the injunction, requiring the rideshare drivers to be treated as employees in October, only to have Prop 22 pass in November, reclassifying them back to independent contractors.