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Posts Tagged ‘Lyft’

An Uber Disruption: California Judge Grants Preliminary Injunction Requiring Uber and Lyft to Stop Classifying Drivers as Independent Contractors

Posted on: August 14th, 2020

By: Josue Aparicio[1]

On Monday, a California Judge granted a preliminary injunction ordering that the popular ride-hailing companies, Uber and Lyft, stop classifying their drivers as independent contractors during the pendency of their litigation against the state of California.

Importantly, the ruling by Judge Ethan Schulman of the San Francisco Superior Court does not automatically convert California’s Uber and Lyft drivers into employees. Rather, it sets up what is expected to be a lengthy appeal process arising from California’s ongoing enforcement of its controversial new law, Assembly Bill No. 5. This decision, however, poses an existential threat to the so-called “gig economy” business model, which relies on a fleet of app-based, on demand, independent contractors who set their own hours, but are not entitled to many of the benefits and protections of California’s labor and employment laws.

The ruling is stayed until August 20th to allow for Uber and Lyft to appeal. On Thursday, Judge Schulman denied both companies’ request to extend the stay beyond August 20th, forcing Uber and Lyft to seek a stay from the appellate court.

California’s Controversial A.B. 5

In September 2019, the California Legislature passed, and Governor Gavin Newsom signed into law, Assembly Bill No. 5 (“A.B. 5”). A.B. 5, which took effect on January 1, 2020, codified the so-called “ABC test” adopted by the California Supreme Court in its 2018 landmark decision, Dynamex Operations West, Inc. v. Superior Court.[2] Under the ABC test, any person providing labor or services for compensation is presumed to be an employee, rather than an independent contractor, unless the “hiring entity” demonstrates that all three of the following conditions are satisfied:[3]

  1. The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  2. The person performs work that is outside the usual course of the hiring entity’s business.
  3. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

In response, three tech companies—Uber, Lyft, and Doordash—filed Proposition 22,[4] a California ballot initiative on the November 2020 ballot that, if enacted, would classify certain app-based drivers as independent contractors and essentially override A.B. 5. Additionally, just two days before its enactment, Uber and Postmates, Inc. filed a lawsuit[5] in federal court against the State of California asserting that A.B. 5 unconstitutionally “targets” gig economy companies and treats them differently from similarly situated groups. In February 2020, a federal district court denied Uber and Postmates’ request for a preliminary injunction that would have prevented the state of California from enforcing A.B. 5 against the two tech companies. An appeal to this ruling is pending in the Ninth Circuit Court of Appeal.

The State of California v. Uber and Lyft

In May, California Attorney General Xavier Becerra joined forces with the City Attorneys of San Francisco, Los Angeles and San Diego to file a lawsuit against Uber and Lyft, asserting the two ride-hailing companies misclassified their drivers as independent contractors in violation of California’s A.B. 5. Then, in June, the State moved for a preliminary injunction enjoining Uber and Lyft from classifying their drivers as independent contractors.

In a 34-page decision, Judge Schulman granted the State’s preliminary injunction, and made three important determinations, which could have major ramifications on the gig economy. First, the court found that Uber and Lyft are indeed “hiring entities” within the meaning of A.B. 5. Second, the court found that Uber and Lyft are in the “transportation business,” as opposed to self-proclaimed “technology companies.” Finally, the court found that the potential adverse effects of reclassifying Uber and Lyft’s drivers, even given the COVID-19 pandemic, did not outweigh the “substantial public harm” that would result to drivers, competing businesses and the general public if the preliminary injunction were not granted.

Employer Takeaway

If upheld, this ruling could have serious implications on the “gig economy.” If these drivers are classified as “employees,” companies like Uber and Lyft would be required to substantially change their business practices and provide their drivers certain benefits employees are entitled to under California law, such as minimum wage, overtime pay, workers’ compensation, unemployment insurance, paid sick leave, and paid family leave.

Companies with a large workforce of independent contractors should be put on notice that this ruling is yet another example of what appears to be California’s increased efforts to enforce A.B. 5 and reclassify the state’s independent contractors as employees. In February, the San Diego City Attorney’s office obtained a similar preliminary injunction against the grocery-delivery platform, Instacart.[6] In June, San Francisco’s District Attorney’s office filed a lawsuit[7] against the takeout delivery platform, DoorDash, Inc., alleging the company is misclassifying its delivery drivers as independent contractors in violation of A.B. 5, and similarly seeks a preliminary injunction to stop the alleged misclassification. And just last week, the California Labor Commissioner’s Office filed a pair of lawsuits in Alameda County Superior Court, which allege Uber and Lyft committed systemic wage theft by misclassifying drivers as independent contractors.

If you have questions or would like more information, please contact Josue Aparicio at [email protected].


[1] Josue Aparicio is an Attorney with Freeman, Mathis & Gary who specializes in worker misclassification claims under California law. (https://www.fmglaw.com/attorney_bio.php?id=408)

[2] Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903.

[3] Lab. Code § 2750.3(a)(1)

[4] Proposition 22, the Protect App-Based Drivers and Services Act, would provide that app-based rideshare and delivery drivers are independent contractors and not employees or agents with respect to their relationship with a network company if certain conditions are met. (Qualified Statewide Ballot Measures, Cal. Secretary of State, https://www.sos.ca.gov/elections/ballot-measures/qualified-ballot-measures/).

[5] Olson v. California (C.D. Cal. Feb. 10, 2020) No. CV 19-10956-DMG, appeal filed, No. 20-55267 (March 11, 2020)

[6] The People of the State of California v. Mablebear, Inc., San Diego Superior Court, Case No. 37-2019-00048731

[7] The People of the State of California v. DoorDash, Inc., San Francisco Superior Court, Case No. CGC-20-584789 (filed June 16, 2020).

Under Attack Again: California Attorney General Announces Misclassification Lawsuit Against Uber and Lyft

Posted on: May 7th, 2020

By: Ryan Greenspan

On May 5, 2020, California Attorney General Xavier Becerra announced that the State of California will be suing Uber and Lyft for misclassifying their drivers as independent contractors.  The precise details of the suit are not presently known, but it is being reported that Uber and Lyft are being accused of violating Assembly Bill 5, went into effect on January 1, 2020 and dramatically changed the legal requirements in California to qualify as an independent contractor.

In Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court established a 3-factor test employers must satisfy to prove that a worker is properly classified as an independent contractor.  Employers must prove the following:

1) that the worker has freedom from control over how to perform the services they provide;

2) that the services provided are outside the business’s normal variety; and

3) that the worker is engaged in an independently established role. 

Assembly Bill 5 codified the Dynamex decision while carving out limited exceptions.  Assembly Bill 5 was expected to significantly impact several of the app-based companies based in California, particularly those commonly known as being part of the “gig economy.”  Companies such as Uber and Lyft have always classified their drivers as independent contractors, which afforded workers the opportunity to set their own hours and work for multiple companies, but also meant those workers did not receive various benefits afforded to employees, such as healthcare, workers’ compensation, expense reimbursements, and a guarantee that they would be paid at least the minimum wage. 

Enforcement litigation does not come as a surprise.  Shortly after Assembly Bill 5 went into effect, Uber and Lyft announced that they would refuse to reclassify their drivers as employees.  In February 2020, a federal judge denied a request from Uber and food delivery company Postmates for a preliminary injunction that would have exempted them from the new law.

Prior to Assembly Bill 5 going into effect, Uber and Lyft assisted in the funding of a statewide ballot measure known as the Protect App-Based Drivers & Services Act.  The Act is expected to be voted upon in the November 2020 election.  If passed, companies such as Uber and Lyft would continue to be permitted to classify their drivers as independent contractors while providing several benefits to their workers, such as a guarantee of at least 120% of the minimum wage, 30 cents per mile for expenses, and a healthcare stipend. 

Uber and Lyft have largely been able to defend or settle a series of class action lawsuits over the issue of worker classification.  However, an enforcement lawsuit from the state presents a unique challenge to the app-based companies because there is less opportunity to reach a settlement than there is with a private plaintiffs’ attorney.

While this case is in its infancy, the outcome will have a tremendous impact on the approximately 500,000 drivers working for Uber and Lyft in California, as well as thousands more who work for companies such as Doordash. If you have any questions or would like more information on this lawsuit or Assembly Bill 5, please contact Ryan Greenspan at [email protected].                        

Independent Contractor vs Employee Status in the Gig Economy

Posted on: May 31st, 2018

By: Daniel Walsh

As recently noted by FMG’s Connor Bateman, Courts across the country are now reexamining coverage issues stemming from auto insurance policies held by drivers working with Transportation Network Companies (“TNCs”) such as Lyft and Uber.

In Dynamex Operations W. v. Superior Court, 2018 Cal. LEXIS 3152, the California Supreme Court set forth a refined and more inclusive standard on the classification of employees vs. independent contractors in the “gig economy” commonly associated with Lyft and Uber but also extending to various delivery services.   An underappreciated side effect of this decision is the effect upon coverage issues that have been litigated for years throughout California courts.  With a robust gig economy in California, the Courts have seen a high number of general liability cases that have turned upon the Trial Court’s interpretation of employee vs independent contractor status.  This, in turn, has created a high volume of declaratory relief lawsuits centered upon liability coverage for the actions of a gig economy participant, as most insurance policies grant coverage to an employee but deny it to an independent contractor.  With the Court clarifying that distinction in Dynamex, California insurance coverage opinions regarding personal injury liability in the gig economy will now require a new focus and analysis.

If you have any questions or would like more information please contact Daniel Walsh at [email protected].

Need a Lyft? Georgia Court of Appeals Decision Raises Coverage Questions for Ridesharing Services and Their Drivers

Posted on: February 19th, 2018

By: Connor M. Bateman

Most personal automobile insurance policies exclude coverage for damages that result from the ownership or operation of a vehicle used as a “public or livery conveyance.” Although typically undefined in the policy, this phrase has generally been understood to encompass vehicles that are “used indiscriminately in conveying the public, rather than being limited to certain persons and particular occasions or governed by special terms.”

The Georgia Court of Appeals recently weighed in on the scope of this exclusion in Haulers Insurance Co. v. Davenport.  In Davenport, the plaintiff sustained injuries in a car accident, sued the other driver, and served his uninsured motorist carrier (Haulers) with a copy of the complaint. At the time of the collision, the plaintiff was giving a ride to a female friend who would occasionally pay the plaintiff to drive her into town. There was no evidence, however, that the plaintiff ever offered paid rides to the general public. The Court of Appeals rejected Haulers’ argument that the policy’s public or livery exclusion barred coverage, reasoning that the exclusion was inapplicable absent evidence that the plaintiff “used his vehicle indiscriminately to transport members of the general public for hire, or regularly rented out his vehicle for hire.” The court recognized, however, that the exclusion would apply in cases where the driver “presents his services indiscriminately to the general public for hire.”

In light of the rising popularity of Transportation Network Companies (“TNCs”) such as Lyft and Uber, the coverage issues presented by this oft-forgotten exclusion should be carefully reexamined. TNC drivers, who use their personal vehicles to transport passengers, will often have no coverage under their personal policies due to the public or livery conveyance exclusion. This exclusion clearly applies to drivers actively transporting passengers and may even be triggered when the driver is simply using the ridesharing application to “troll” for potential customers. While some of these gaps have been addressed by commercial insurance policies provided by the TNCs, drivers may still be left without coverage in certain situations. For instance, although TNCs typically provide liability coverage for a driver who has the app turned on and is waiting to accept a ride, the TNC policies will not likely cover damages caused by someone or something else during that initial period. To account for this, the TNCs suggest that such damages may be covered by the at-fault driver’s policy or the TNC driver’s personal policy. However, the public or livery conveyance exclusion often extends to uninsured motorist, collision, and comprehensive coverage. And because courts have held that the public or livery conveyance exclusion applies when drivers “present their services” to the general public, the exclusion is arguably triggered even when the TNC driver is merely waiting for the application to connect to a customer.

Although the reach of this exclusion has yet to be fully examined in the context of ride-sharing services, these and other coverage issues will likely continue to arise. For additional information, please contact Connor Bateman at [email protected].