The ride-hailing companies Uber Technologies Inc. and Lyft Inc. are ordered by the California judge Ethan Schulman to classify their drivers as employees instead of independent contractors. This order came on Monday by the judge, which follows the new gig-worker law that came in effect this year. For now, the ruling is on hold until the companies have a chance to appeal.
What is Gig-worker Law?
It is referred as Assembly Bill 5 which states that the workers can only be classified as contractors if they perform duties outside of the company’s “usual course” business, are “free from the control and direction” of the company and regularly do the same type of work for other companies or organizations.
Gig-worker Law: What is happening?
In May, the companies were sued in the California Superior Court. The reason cited for this was that the decision to classify drivers as contractors is depriving them of rights; such as paid sick leave and unemployment insurance. While on the other side Uber and Lyft have stated that the law could take away the flexibility for drivers; and force them to work on the basis of pre-scheduled shifts. Both the companies (Uber and Lyft) are San Francisco based and they stated that they have made a plan to appeal.
Both the companies were accused of violating Assembly Bill 5 in a lawsuit filed on 5th May by California Attorney General Xavier Becerra and the cities of Los Angeles, San Diego, and San Francisco.
Gig-worker Law: How is it affecting?
The law has been one of the most significant challenges faced by Uber and Lyft since the beginning of the year. On the basis of the law, the government started to demand many of the same labor protections and other regulatory requirements that the companies were not using or were avoiding including in their business models. The company’s rules and mottos extend beyond the ruling; as the coronavirus pandemic has caused a great loss in their ride-hailing business.
It has been reported by Uber that the company is facing a huge decline in as the stay-at-home orders made their customers rely on local travel. Both companies have faced another big loss last week; and they are cutting costs, including staff, trying to ride out the crisis. Both companies have argued that they facilitate transactions between drivers and passengers, and not transportation companies.
The Judge has been asked by the companies to postpone the litigation and they also cited other reasons; which included a proposed ballot initiative for November that would exempt them from the California law.