California appeals court: Uber and Lyft likely misclassified drivers as contractors


Angela Lang/CNET

In the latest of a back-and-forth battle between the state of California and Uber and Lyft, an appeals court ruled Thursday evening that an injunction issued against the two ride-hailing companies over the status of their drivers was an appropriate measure.

The injunction was issued in August by Judge Ethan Schulman of the San Francisco Superior Court, who ruled that the ride-hailing companies must start classifying their drivers as employees in the state. The judge allowed the companies 10 days to appeal the ruling, which they did.  

The First Appellate District court in San Francisco heard arguments from the companies last week and issued its ruling Thursday siding with Schulman. The appeals court said in its 74-page ruling that there was an “overwhelming likelihood” Uber and Lyft are violating California law AB5. That law requires some employers that use independent contractors to reclassify their workers as employees and provide more worker benefits. 

The injunction stems from a lawsuit against Uber and Lyft filed by the state of California in May. The suit says the companies “exploited hundreds of thousands of California workers” by classifying drivers as independent contractors and are violating AB5, which took effect in January.

As this lawsuit works its way through the courts, Uber, Lyft and other gig economy companies have sponsored a state ballot measure campaign with nearly $200 million to bring the issue to voters. Proposition 22 aims to create an exemption for the companies to AB5 and allow them to continue classifying their workers as independent contractors.

Julie Wood, a Lyft spokeswoman, said the appeals court ruling makes the vote on Proposition 22 “more urgent than ever.” The company said it’s considering other legal options, including an appeal to the California Supreme Court.

An Uber spokesman said the company is also considering its appeal options and emphasized the vote on Proposition 22. “Rideshare drivers will be prevented from continuing to work as independent contractors, putting hundreds of thousands of Californians out of work and likely shutting down ridesharing throughout much of the state,” he said.

Thursday’s ruling won’t have an immediate effect. The court gave the companies at least a 30-day stay without changes regarding driver status. 

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