Shares of both companies fell about 7%. A hearing for the matter was set for Aug. 6.
In a filing in the Superior Court of California in San Francisco on Wednesday, lawyers for California Attorney General Xavier Becerra said their office will file a request for a preliminary injunction.
“Misclassifying your workers as ‘consultants’ or ‘independent contractors’ simply means you want your workers or taxpayers to foot the bill for obligations you have as an employer — whether it’s paying a legal wage or overtime, providing sick leave, or providing unemployment insurance,” said Becerra in a statement. “We’re seeking a court order to force Uber and Lyft to play by the rules.”
The action comes under San Diego Assemblymember Lorena Gonzalez’ Assembly Bill 5, the new law that requires most independent contractors to become traditional shift employees, except in a handful of politically connected occupations like doctors and real estate agents.
Uber in a statement said most drivers preferred the independence afforded by working as contractors and that it calculated over 158,000 Uber drivers in California would lose work if the reclassification happened.
Lyft said that if the injunction is granted “it would have a devastating effect on millions of Californians at the worst possible time.”
The rideshare companies and DoorDash have funded a November ballot initiative that would exempt from Assembly Bill 5 any business using a mobile app to connect customers with drivers.
Stacey Wells, spokesperson for the coalition behind the ballot initiative, accused Becerra of pursuing “yet another malicious legal action against drivers that underscores exactly why we’re pursuing the ballot measure.”
“It is baffling that anyone would seek to end this critical work, threatening 900,000 jobs, especially now. Most drivers do so part-time — 80 percent drive fewer than 20 hours a week and most drive less than 10,” she said. “They’re overwhelmingly doing this to supplement income around other jobs and life responsibilities and wouldn’t be able to work as employees.”
San Diego City Attorney Mara Elliott, who has targeted gig economy company InstaCart locally, joined Becerra and the city attorneys of Los Angeles and San Francisco in supporting the injunction.
“It is time for Uber and Lyft to stop flouting the law and start treating their workers fairly by classifying them as the employees that they are,” said Elliott.
Gig economy companies say California labor laws make it difficult to allow employees to choose when and how much they want to work, requiring a traditional shift system instead, while Becerra says that is not the case.
Updated at 5:30 p.m. on Wednesday, June 24, 2020
— From Staff and Wire Reports