The court battle to reclassify Uber and Lyft drivers as employees in accordance with AB5 may exacerbate California’s unemployment rate if the companies follow through on intimations to move out of state.
“The argument the companies keep making is we are platforms, we are go-betweens,” Williamson M. Evers, Ph.D, senior fellow and director of the Center on Educational Excellence at the Independent Institute, told the Northern California Record. “If their legal remedies do not succeed and the [Proposition 22] ballot initiative does not pass, what argument could you think of for these companies to stay?”
Uber and Lyft are fighting a lawsuit filed in May by Attorney Gen. Xavier Becerra that orders them to comply with AB5 and classify their independent contractor drivers as full-time employees. After San Francisco County Superior Court Judge Ethan Schulman granted the state’s motion for a preliminary injunction Aug. 10, the companies were ready to stop service in California late last week.
Then on Aug. 20, the 1st District Court of Appeal in San Francisco granted the companies’ petition for a stay, provided they comply with a several mandates before scheduled oral arguments on Oct. 13, CNBC reported.
"We are glad that the Court of Appeals recognized the important questions raised in this case, and that access to these critical services won't be cut off while we continue to advocate for drivers' ability to work with the freedom they want," Uber spokesperson Davis White said in a statement published on Politico.com.
The mayors of San Diego and San Jose are among the elected officials that had urged the appeals court to grant the stay, KPBS reported.
While the companies continue the appeals process, they are also working toward passage of Proposition 22 on the Nov. 3 ballot, which would allow drivers to be designated as independent contractors and qualify them for other compensation.
“We have to think of Uber and Lyft – they’re businesses. They’re not going to do some deal to appease these politicians in Sacramento,” Evers said. “They have to earn money or the investors’ funds are going to go elsewhere, to companies that are allowed to serve customers and are not hobbled in this way.”
Evers noted AB5 also has recently impacted parents trying to find tutors during remote learning, with confusion about whether they would be independent contractors, or employees and subject to payroll taxes.
“Parents are trying to hire tutors for their children to help them with schoolwork; it’s not clear if it could be sabotaged by this law. These are all, I think, unintended consequences,” said Evers, who initiated an April letter to Gov. Gavin Newsom, calling for suspension of AB5 that was signed by 153 scholars
Doctors, lawyers, dentists and some other practitioners have been granted exemptions from AB5, but many more occupations remain subject to it.
Even if Uber and Lyft choose to stay, AB5’s regulations will continue to cost California jobs at a time when workers can least afford it, Evers said.
“This law is going to be horrible for the California economy, which is already fragile in the wake of these lockdowns,” Evers said.