SAN FRANCISCO (CBS SF) -- City Attorney Dennis Herrera on Tuesday announced San Francisco would be joining the state and other cities in suing Uber and Lyft over the misclassification of their drivers as independent contractors.
Pursuant to authority outlined by State Assembly Bill 5 that passed last year and California's Unfair Competition Law, State Attorney General Xavier Becerra and city attorneys in San Francisco, Los Angeles and San Diego allege that Uber's and Lyft's misclassification of drivers deprives workers of critical workplace protections such as the right to minimum wage and overtime, as well as access to paid sick leave, unemployment insurance and disability insurance.
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AB5 took effect January 1. Uber and Lyft could not immediately be reached for comment.
In the suit filed in the Superior Court of San Francisco, the coalition seeks restitution for workers, a permanent end to the two companies unlawfully misclassifying drivers as independent contractors and civil penalties that could reach hundreds of millions of dollars.
"These companies are headquartered in San Francisco. We are going to police our own to ensure the law is followed, workers are protected, and the marketplace is fair," said San Francisco City Attorney Dennis Herrera in a joint statement released Tuesday."We have been building this case for months in partnership with the California Attorney General and our counterparts in Los Angeles and San Diego. Uber and Lyft are breaking the law. We are going to put a stop to it."
Herrera continued: "Uber and Lyft claim that properly classifying drivers as employees is incompatible with flexibility. That is a lie. There is no legal reason why Uber and Lyft can't have a vast pool of employees who decide for themselves when and where they work – exactly as drivers do now. These companies simply don't want to do it. Uber and Lyft are selling a lie. They are lying to the public and lying to their drivers."
The statement announcing the lawsuit noted that with jobless claims skyrocketing during the COVID-19 pandemic, the vulnerability of Uber's and Lyft's drivers has become more apparent than ever.
The state of California represents Uber and Lyft's largest source of revenue. The companies, as well as Doordash, are funding a ballot initiative campaign to exclude their drivers from the law while giving new benefits such as health care coverage. The initiative is likely to qualify for the November ballot.
A federal judge in February denied Uber and Postmates' request for a preliminary injunction that would have exempted them from the law. But separately, a federal judge in January indefinitely blocked the law from applying to more than 70,000 independent truckers, deciding that it is preempted by federal rules on interstate commerce.
The state Legislature is also considering amending the law, though lawmakers are split whether to broaden or narrow it as other groups — such as freelance writers and photographers — contend they have been hurt by it through unintended consequences.
The lawsuit asserts that Uber and Lyft gain an unfair and unlawful competitive advantage by inappropriately classifying massive numbers of California drivers. As a result, the companies each avoid hundreds of millions of dollars in social safety net obligations, skipping out on contributing to state payroll taxes that are used to fund general health and welfare programs that benefit all Californians.
The suit seeks up to $2,500 for each violation of the California Unfair Competition Law and up to another $2,500 for violations perpetrated against senior citizens or individuals with disabilities.
On Tuesday, Uber sent the following statement to KPIX 5 in response to the lawsuit:
"At a time when California's economy is in crisis with four million people out of work, we need to make it easier, not harder, for people to quickly start earning. We will contest this action in court, while at the same time pushing to raise the standard of independent work for drivers in California, including with guaranteed minimum earnings and new benefits."
Lyft also released a statement. It read: "We are looking forward to working with the attorney general and mayors across the state to bring all the benefits of California's innovation economy to as many workers as possible, especially during this time when the creation of good jobs with access to affordable healthcare and other benefits is more important than ever."
The question of how drivers are defined goes back to the very first days of ride-sharing, but Tuesday's lawsuit is being driven, in part, by current events.
"We are seeing that workers or without safety nets, without sick leave, without disability pay," said Dara Kerr, senior reporter at CNET. "That is all the more stark if they don't have these benefits from the company."
Kerr says the coronavirus has energized the push for more gig-worker protections, the kinds of things that come with employee status.
"Both Uber and Lyft are really struggling financially, and they have both said in the past, multiple times, that if they are forced to convert their drivers into employees they are going to lose millions of dollars," Kerr said. "So that's one of the reasons for the pushback from the companies."
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