California sues Uber, Lyft over misclassifying drivers as contractors

(Reuters) – California and three of its largest cities sued Uber Technologies and Lyft on Tuesday, accusing them of improperly classifying their drivers as independent contractors rather than employees, avoiding workplace protection and retaining workers' benefits.

ARCHIVE PHOTO: An Uber sticker is seen in driver Margaret Bordelon's car in Lafayette, Louisiana, USA, on February 16, 2020. Photo taken on February 16, 2020. REUTERS / Callaghan O & # 39; Hare

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The lawsuit, accompanied by Los Angeles, San Francisco and San Diego, was filed under a new state law designed to protect workers in the so-called concert economy. He argued that the incorrect classification of companies harms workers, law-abiding companies, taxpayers and society in general.

The controversial law strikes at the heart of the business model of technology platforms like Uber, Lyft, Postmates, DoorDash and others who rely heavily on the state's 450,000 contract workers, not full-time employees, to drive passengers or deliver food via the app. Services.

"No business model should succeed in mistreating workers and breaking the law," California Attorney General Xavier Becerra said during a virtual press conference with his city colleagues, adding that Uber and Lyft drivers lacked basic worker protections, including sick leave and overtime pay.

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Uber and Lyft's shares fell briefly, but recovered shortly after the lawsuit was announced.

Uber's shares rose more than 2% and Lyft's, in a largely positive market.

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Uber said in a statement that it will contest the lawsuit, while pushing for the implementation of its own proposal for additional benefits for drivers.

"At a time when California's economy is in crisis, with four million unemployed people, we need to make it easier, not more, for people to start earning quickly," the company said.

The unions argue that Uber is trying to circumvent labor laws by creating a new "subclass" of workers entitled to significantly less benefits than traditional employees.

Lyft said in a statement that it would work with the attorney general and mayors, "to bring all the benefits of California's innovation economy to as many workers as possible." The company declined to say whether it was seeking a settlement or would fight the lawsuit.

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Uber in December sued the blocking of the new law, known as AB5, arguing that it punished application-based companies. The company said on Tuesday that the new lawsuit was unjustly and arbitrarily choosing hitchhiking companies, but it also posed a threat to self-employed workers in all sectors.

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Companies in the past said their drivers were correctly classified as independent contractors, adding that most of them would not want to be considered an employee, valuing the flexibility of working on demand.

The city's lawyers on Tuesday did not say whether they had immediate plans to sue other concert-economy companies.

The coronavirus crisis, in particular, exposed the lack of a safety net for workers, with tens of thousands of them seeking sick leave and unemployment benefits.

"American taxpayers end up having to help carry the load that Uber and Lyft don't want to accept. These companies will accept workers 'work, but they won't accept workers' protections," said Becerra.

Becerra also referred to Uber and Lyft's effort to include their drivers in a federal coronavirus relief account for unemployment benefits. These benefits are generally reserved for workers whose employers pay the unemployment insurance system, which Uber and Lyft do not.

Reporting by Tina Bellon in New York; additional reporting by Peter Henderson; Editing by Bill Berkrot and Marguerita Choy

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