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Uber-Lyft Fight With California on Driver Status Picks Up Steam

Malathi Nayak and Lizette Chapman

(Bloomberg) -- California is escalating its fight with Uber Technologies Inc. and Lyft Inc. over a new state law designed to give gig-economy workers employee benefits, including health care and overtime pay.

Saying it’s time for the ride-hailing platforms to “play by the rules,” California Attorney General Xavier Becerra said Wednesday that state and local officials will seek a court order to immediately enforce Assembly Bill 5, which tightens standards on how employers classify workers. The move comes after California sued the two San Francisco-based companies in May for unlawfully misclassifying drivers as independent contractors.

If California persuades a state judge to order a preliminary injunction, Lyft and Uber would be forced to pay for worker benefits and workplace protections while the legal dispute proceeds. Those added costs would be a significant setback to the companies while they are already reeling from revenue losses and layoffs amid the coronavirus pandemic.

“It’s time for Uber and Lyft to own up to their responsibilities and the people who make them successful: their workers,” Becerra said in a statement. “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.”

Read More: Uber, Lyft Sued by California in Major Gig-Economy Crackdown

Uber, Lyft and other companies such as DoorDash Inc. which use a labor model that similarly relies on independent contractors are to set to announce Thursday they will place a counter-measure on the state’s November election ballot to exempt drivers from the new California law.

Most Uber drivers want to work independently and the company has changed its app to abide by California law, a company spokesman said. “When over 3 million Californians are without a job, our elected leaders should be focused on creating work, not trying to shut down an entire industry,” the spokesman said.

Lyft said it will fight the state’s injunction request.

“We believe the courts should let the voters decide,” company spokeswoman Julie Wood said. “Trying to force drivers to give up their independence 100 days before the election threatens to put a million more people out of work at the worst possible time. It would be incredibly harmful to millions of people and the California economy to grant this motion 100 days before the voters decide.”

The state argued that misclassification of workers by Uber and Lyft burdens taxpayers because the lack of benefits makes drivers turn to government-funded income support programs. Becerra is backed in the legal fight by the city attorneys of Los Angeles, San Diego and San Francisco.

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