California Superior Court Judge Ethan Schulman has granted a preliminary injunction forcing Uber and Lyft to reclassify its drivers as employees. This order is set to go into effect in ten days.
“The Court is under no illusion that implementation of its injunction will be costly,” Judge Schulman wrote in the order. “There can be no question that in order for Defendants to comply with A.B. 5, they will have to change the nature of their business practices in significant ways, such as by hiring human resources staff to hire and manage their driver workforces.”
The decision comes after Judge Schulman heard arguments in court last week. The hearing was the result of California Attorney General Xavier Becerra, along with city attorneys from Los Angeles, San Diego and San Francisco, filing a preliminary injunction in an attempt to force Uber and Lyft to comply with AB 5 and immediately stop classifying their drivers as independent contractors.
In the order, Judge Schulman says the plaintiffs are likely to prevail on the argument that Uber and Lyft are violating AB 5. AB 5 codifies the 2018 ruling established in Dynamex Operations West, Inc. v Superior Court of Los Angeles. In that case, the court applied the ABC test and decided Dynamex wrongfully classified its workers as independent contractors based on the presumption that “a worker who performs services for a hirer is an employee for purposes of claims for wages and benefits…”
According to the ABC test, in order for a hiring entity to legally classify a worker as an independent contractor, it must prove (A) the worker is free from the control and direction of the hiring entity, (B) performs work outside the scope of the entity’s business and (C) is regularly engaged in an “independently established trade, occupation, or business of the same nature as the work performed.”
The motion for a preliminary junction was filed as part of the suit filed in May, which asserted Uber and Lyft gain an unfair and unlawful competitive advantage by misclassifying workers as independent contractors. The suit argues Uber and Lyft are depriving workers of the right to minimum wage, overtime, access to paid sick leave, disability insurance and unemployment insurance. The lawsuit, filed in the Superior Court of San Francisco, seeks $2,500 in penalties for each violation, possibly per driver, under the California Unfair Competition Law, and another $2,500 for violations against senior citizens or people with disabilities.