Uber and Lyft must convert drivers into employees and judge the rules

Uber and Lyft have been ordered to convert their California drivers from independent contractors to employees with benefits, an early loss in a legal battle the gig economy cannot afford to lose.

The judge’s ruling on Monday won’t be the last word, as ridesharing companies are expected to appeal the far-reaching preliminary injunction that could cause them to halt their services as they figure out how to adjust their business model to suit. conform.

The case brought by California officials to enforce a state labor law that came into effect this year is the most serious legal threat to the odd-job economy to date – and comes as many businesses that depend on contractors for on-demand services are already reeling from the pandemic. The news erased some of Lyft’s stock gains on Monday, and Uber’s shares were little changed.

San Francisco Superior Court Judge Ethan Schulman agreed to stay the injunction for 10 days so that businesses could appeal his ruling.

Schulman has agreed with California Attorney General Xavier Becerra that Uber and Lyft are in violation of Assembly Bill 5, which states that workers can generally only be considered contractors if they perform duties outside of the normal course of business. If companies were forced to reclassify their California drivers as employees, they would be forced to pay for overtime, health care and other expensive benefits.

Lyft’s attorney argued in an Aug. 6 hearing that the injunction sought by Becerra would wreak havoc on businesses’ services and cause “enormous harm” to drivers and motorcyclists.

The city of San Francisco, where the two transportation companies are based, joined Becerra’s lawsuit and argued that the drivers suffered for years as Uber and Lyft became giants by violating state labor law. .

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