California sues Uber and Lyft, alleging drivers are misclassified

"We intend to make sure that Uber and Lyft play by the rules," says California Attorney General Xavier Becerra.

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3 min read

A new lawsuit against Uber and Lyft aims to enforce California's AB 5 law.

James Martin/CNET

The state of California is suing Uber and Lyft. Attorney General Xavier Becerra filed a lawsuit against the two ride-hailing companies on Tuesday alleging they've "exploited hundreds of thousands of California workers" by classifying their drivers as independent contractors rather than employees.

"It's those vulnerable drivers who are the losers in this whole process," Becerra said during a press call with reporters on Tuesday. "We believe that innovation doesn't require you to mistreat workers."

The lawsuit alleges Uber and Lyft violated a California state law called AB 5, which aims to ensure workers have adequate labor protections by classifying them as employees. The suit was filed in San Francisco County Superior Court by the Attorney General's Office in conjunction with the city attorneys from San Francisco, Los Angeles and San Diego.

Watch this: Uber, Lyft drivers demand protective gear during coronavirus pandemic

The debate over gig worker benefits has raged for years. Several lawsuits have been filed against Uber, Lyft and other gig economy companies dating as far back as 2013. But now, as the novel coronavirus pandemic has shaken society, that debate has been amplified.

Gig workers are considered essential workers, meaning they can continue to work as the virus spreads. Because they're still out there, delivering food to people in quarantine and transporting medical workers to and from hospitals, they can be more at risk of contracting COVID-19. Thousands of Uber and Lyft drivers have been infected with or exposed to the coronavirus, according to the companies, and at least five drivers have died from the disease.

An Uber spokesman said the company plans to fight the lawsuit. "At a time when California's economy is in crisis with 4 million people out of work, we need to make it easier, not harder, for people to quickly start earning," he said.

A Lyft spokesman said the company will work with state lawmakers "to bring all the benefits of California's innovation economy to as many workers as possible."

As independent contractors, Uber and Lyft drivers aren't entitled to the same benefits as employees. They don't have company health insurance, sick leave, family leave, disability or workers compensation. Both Uber and Lyft have offered drivers two weeks of sick leave if they're infected with or are exposed to COVID-19, but CNET has found that pay can be hard to get.

"The COVID-19 pandemic has laid bare what Uber and Lyft's greed is costing their workers and the public," said Mike Roth, spokesman for the group Coalition to Protect Riders and Drivers. "Their cynical effort is yet another cruel twist of the knife as drivers struggle to find protective equipment, turn to food banks to feed their families, and worry how they'll survive if they get sick with no paid time off and no health insurance."

California's lawsuit against Uber and Lyft aims to make the two companies stop classifying their drivers as independent contractors. The suit says that the companies "gain an unfair and unlawful competitive advantage" with such classification and avoid paying state payroll taxes.

"California has ground rules with rights and protections for workers and their employers," Becerra said. "We intend to make sure that Uber and Lyft play by the rules." 

Uber and Lyft are part of a coalition of gig economy companies sponsoring a November ballot initiative, which could exempt them from AB 5. Both companies have spent $30 million to support the measure, known as the "Protect App-Based Drivers and Services Act," and both said they'll spend more on the campaign if need be.

California lawmakers brought attention to the ballot initiative during the press call on Tuesday, saying it makes their lawsuit all the more important.

"They're going to go to the ballot and spend tens of millions of dollars to overturn the will of California's legislature," San Francisco City Attorney Dennis Herrera said. "The time for the rapacious conduct needs to come to an end."

The lawsuit seeks to fine the companies up to $2,500 for each violation under California law. If a court rules in favor of the state, Uber and Lyft could end up owing hundreds of millions of dollars in those civil penalties and in back wages to drivers.