Appeals court upholds order forcing Uber, Lyft to classify drivers as employees
The ruling marks another victory for the state's Democratic leaders, who have pressed the ride-hailing companies to reclassify their drivers as employees.
The First District Court of Appeal late Thursday affirmed a preliminary injunction forcing Uber Technologies Inc. and Lyft Inc. to classify their drivers as employees, not independent contractors.
The unanimous three-justice panel concluded that San Francisco Superior Court Judge Ethan Schulman committed no legal error Aug. 10 when he found that the two ride-hailing companies should no longer “evade” California worker classification laws “merely because their businesses are so large that they affect the lives of many thousands of people.”
Lawyers for Uber and Lyft had argued that the injunction was too broad and premature.
Related: Pressure is on for Uber, Lyft to reclassify drivers as employees in California
“The People counter, correctly, that a party suffers no grave or irreparable harm by being prohibited from violating the law and that defendants’ financial burdens do not rise to the level of irreparable harm,” Associate Justice Jon Streeter wrote for the court in a 70-page opinion.
“Moreover, the People contend, again correctly, nothing in the preliminary injunction prevents defendants from allowing drivers to maintain their flexibility rather than assigning rigid shifts,” Streeter continued.
Given that the California Supreme Court spelled out the new “ABC Test” for classifying workers in its 2018 Dynamex ruling, Uber and Lyft should “have come away with an expectation that, without legislative relief, the foundation of [their] ride-sharing business model, to the extent it was based on treating drivers as independent contractors, would highly likely have to change.”
Lyft spokesperson Julie Wood said the company is considering all its legal options. “This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22,” Wood said.
Uber spokesperson Davis White said the company is “considering our appeal options.”
The ruling marks another victory for the state’s Democratic leaders, who have pressed the ride-hailing companies in legislation and in continuing public comments to reclassify their drivers as employees.
The appellate court issued a stay of Schulman’s order in August. But the justices also required the two companies’ CEOs to sign sworn statements acknowledging that they were ready to quickly comply with the order should the court affirm the injunction and Californians vote down Proposition 22, the Nov. 3 ballot measure that would allow Uber and Lyft to continue treating their drivers as independent contractors.
The stay will remain in place for 30 days after the remittitur issues. The companies are likely to appeal Thursday’s decision to the Supreme Court.