OAKLAND, Calif. — Uber and Lyft must treat their California drivers as employees, providing them with the benefits and wages they are entitled to under state labor law, a California appeals court ruled Thursday.
The decision points to growing agreement between the state courts and lawmakers that gig workers do not have the independence necessary for them to be considered contractors.
The ruling by the California First District Court of Appeal is the result of a lawsuit brought by California’s attorney general and the city attorneys of San Francisco, Los Angeles and San Diego. The state and city agencies sued the ride-hailing companies in May to enforce a new state labor law that aimed to make gig workers into employees.
After a lower court ruled that Uber and Lyft must immediately comply and hire the drivers, the companies fought back. They threatened to shut down completely in California and appealed the decision, winning a last-minute reprieve from the appellate court while it considered the case.
Uber and Lyft did not immediately respond to requests for comment Thursday evening, but are unlikely to threaten a similar shutdown. The appellate court required them to develop plans to employ drivers in case the ruling did not go in their favor.
“When violation of statutory workplace protections takes place on a massive scale, as alleged in this case, it causes public harm over and above the private interest of any given individual,” the court wrote in its decision on Thursday.
State officials have argued that the companies must comply with the law, known as Assembly Bill 5, so that workers can obtain sick leave, overtime and other benefits — needs that have become especially pressing during the pandemic.
“Every other employer follows the law,” Matthew Goldberg, deputy city attorney with the San Francisco City Attorney’s Office, told the appeals court during arguments last week. “This is dollars and wages and money that is being stolen from drivers by virtue of the misclassification.”
But Uber and Lyft have argued that they are technology companies, not transportation businesses. Employing drivers would force them to raise fares and hire only a small fraction of the drivers who currently work for them, they said.
The companies are sponsoring a ballot initiative to exempt them from the law and allow them to continue classifying drivers as independent contractors. The court gave Uber and Lyft a grace period, and if the ballot initiative is successful, it could throw the ruling into question.
This is a developing story. Check back for updates.