Source: Uber, Lyft

Uber and Lyft Lose California Appeal on Driver Classification



Uber and Lyft are popular ride-sharing app companies. They lost their appeal to an August court ruling that would require them to classify drivers as employees instead of independent contractors. How will the ruling impact Uber and Lyft?

Article continues below advertisement

NPR reported that in May, the state of California and the cities of San Francisco, San Diego, and Los Angeles sued Uber and Lyft to force compliance with state laws that provide protections to gig workers. Assembly Bill 5, or AB-5, which passed in January, altered the circumstances under which a company may classify its workers as independent contractors. 

Source: Lyft
Article continues below advertisement

“Uber and Lyft have used their muscle and clout to resist treating their drivers as workers entitled to those paycheck and benefit protections," Attorney General Xavier Becerra said after the ruling, according to CNN Business.

Leadership at both Uber and Lyft expressed their disapproval of the past rulings. They warned that compliance would likely mean huge reductions in the number of drivers the companies could hire and a price hike for customers.

Article continues below advertisement

Proposition 22 polling

The court’s ruling may be insignificant in November if California voters approve Proposition 22. The ballot measure would enable ride-sharing and food delivery apps to continue its “independent contractor” classification of drivers. 

As NPR noted, many drivers for both companies prefer their independent contractor status because of the flexibility in their schedules as well as other benefits. Some drivers want the protections given under the labor law.

Article continues below advertisement

Lyft and Uber have thrown immense support at the proposition, along with other delivery companies including DoorDash, Instacart, and Postmates, which is owned by Uber. The app companies have poured a total of $188 million into promoting the measure, according to CNN Business.

Will Prop. 22 pass?

Prop. 22 does offer some concessions in labor and payment practices, including a minimum earnings guarantee of 120 percent of the minimum wage, according to The Mercury News. However, there are some loopholes. For example, the “engaged time” drivers can charge for only includes time spent fulfilling a gig and not time spent waiting on the job.

Article continues below advertisement
Source: Uber

A poll released in September by the University of California, Berkeley showed that 39 percent of voters will likely support the measure, 36 percent were opposed, and another 25 percent were undecided, according to NPR.

Article continues below advertisement

Julie Wood, a spokesperson for Lyft, spoke after the ruling upholding the requirement. She said, “This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22,” according to CNN Business

What does the ruling mean for Uber and Lyft drivers?

If Uber and Lyft are forced to reclassify their drivers as employees instead of independent contractors, it will change the landscape of the ride-sharing app industry.

Article continues below advertisement

CNN Business reported that Uber has threatened that “hundreds of thousands of Californians” would be put out of work if Prop. 22 doesn't pass, which could result in “shutting down ridesharing throughout much of the state.” Lyft spokespersons have also hinted that rideshare operations might not continue in California due to the reclassification.

Uber's stock price today

As of 10:39 a.m. ET on Oct. 23, Uber stock was priced at $36.63 per share. 

Lyft's stock price today

As of 10:40 a.m. ET on Oct. 23, Lyft stock was priced at $25.78 per share. 


More From Market Realist