CA Judge Orders Uber and Lyft to Classify Drivers as Employees Not Contractors

transportation network companies (TNCs)

Written By ESR News Blog Editor Thomas Ahearn

On August 10, 2020, in a ruling that could possibly affect the “gig economy,” California Superior Court Judge Ethan Schulman ordered Uber and Lyft to reclassify their drivers from independent contractors to employees so they receive the same protections and benefits as other workers at transportation network companies (TNCs).

Judge Ethan Schulman ruled that Uber and Lyft failed to comply with California Assembly Bill No. 5 (A.B. 5), a law that took effect on January 1, 2020, to ensure gig economy workers could receive health insurance, workers’ compensation and paid sick and family leave. Independent contractors are not provided these benefits.

“It bears emphasis that these harms are not mere abstractions; they represent real harms to real working people,” Judge Schulman wrote. “To state the obvious, drivers are central, not tangential, to Uber and Lyft’s entire ride-hailing business.” The order does not take effect for ten days. Uber and Lyft may shut down in California.

The complaint filed in May 2020 on behalf of the People of the State of California claimed Uber and Lyft misclassified drivers as independent contractors and not employees in violation of A.B. 5. Voters in the state will consider Proposition 22, a ballot initiative exempting Uber and Lyft from A.B. 5, in the November 2020 election.

As reported earlier by the ESR News Blog, Uber and Lyft are also dealing with numerous court closures caused by the ongoing Coronavris (COVID-19) pandemic that are delaying the background checks that their drivers need to complete in order to work, according to a story on the website of The Financial Times.

The Financial Times reported that “drivers for Uber and Lyft are being suspended for weeks because the coronavirus crisis has stalled the court system needed for background checks,” adding that these gig economy firms perform criminal checks when drivers first sign up and typically carry out an annual check on their workers.

The third-party company used by both Uber and Lyft to screen their drivers told The Financial Times that court closures have led to “unavoidable delays in processing some background checks” and “more than 800 local courthouses across the U.S. have suffered shutdowns of varying severity since the start of the pandemic.”

The Financial Times reported that Uber and Lyft both indicated they were working with state governments and their screening provider to minimize disruptions for drivers awaiting the results of their background checks during the pandemic. Neither Uber nor Lyft could estimate how many drivers have been affected by the delays.

Gig economy businesses are taking the background checks of their on-demand workforces more seriously with ongoing monitoring and continuous screening on workers, according to Employment Screening Resources® (ESR), which selected this trend as one of the “ESR Top Ten Background Check Trends” for 2020.

ESR founder and CEO Attorney Lester Rosen will present the session “Serving the Gig Economy – Challenges and Opportunities for Background Screeners” on September 15, 2020, for the Professional Background Screening Association (PBSA) at the first-ever “virtual” 2020 PBSA Annual Conference. To register for the event, click here.

Coronavirus (COVID-19) is a respiratory illness that spreads from person to person. As of August 17, 2020, there are approximately 21.7 million global cases and 775,000 global deaths, while the United States leads the world with approximately 5.4 million cases and 170,000 deaths, according to research from Johns Hopkins University.

Employment Screening Resources® (ESR) – a global background check firm accredited by the PBSA – offers solutions for screening “gig economy” workers and a white paper titled “Background Screening of Extended Workforce Necessary to Compete in Modern Economy.” To learn more about ESR, visit www.esrcheck.com/.

NOTE: Employment Screening Resources® (ESR) does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational purposes only.

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