California Imposes Rulings on Uber and Lyft — What This Means for Their Drivers and Customers Within the State

By Thomas Price Tuesday, October 27, 2020

As the 2020 election draws even nearer for the United States, the nation is hyper-focused on the results of the presidential race between former Vice President Joe Biden and President Donald Trump. The result will obviously have a major impact on the country’s future, with each candidate representing vastly different positions on many major topics. However, a far less known yet almost as significant measure will be on California’s ballot. With major questions surrounding the classification of Uber and Lyft drivers as independent contractors, California courts have been trying to push back against them with specific rulings for Uber and Lyft. In response to that, Uber and Lyft have put a measure on the California ballot trying to create an exemption for the drivers who work for them. What has the state of California been doing in response to Uber and Lyft, what would be entailed from the state measure if it is to pass, and what are the implications for independent contractors in California?

California’s Ruling on Workers for Uber and Lyft

On October 22, a California appeals court ruled against Uber and Lyft, forcing the two companies to reclassify the drivers who work through their apps as employees as opposed to independent contractors. This ruling is based on the precedent created by state law Assembly Bill 5, which took effect at the beginning of 2020. What Assembly Bill 5 entails is essentially detailing a more specific outline for what constitutes an independent contractor. The classification requires that for a worker to be considered an independent contractor, that worker must be entirely free from the company’s control along with the necessity of doing work that is not within the contracted company’s core business. The appeals court ruled that Uber and Lyft violated that bill. This point of contention about Assembly Bill 5, especially regarding Uber and Lyft, has resulted in Proposition 22 being on the ballot in California during the upcoming election.

Proposition 22 and Potential Long-Term Effects

Considering the massive effect this ruling could have on Uber and Lyft, the response has been equally as large, with Proposition 22 seeing massive funding coming from the two companies in order to pass it. That funding has equaled up to $188 million collectively from both rideshare juggernauts. Proposition 22 would create an exemption from Assembly Bill 5 for rideshare and delivery drivers, most of whom are employed by Uber and Lyft or their respective food delivery services. However, the proposed law would concede on the part of Uber and Lyft that there will be minimum earnings for those actively working. If the proposition fails, Uber and Lyft will be required to categorize these workers as employees, which would entitle them to minimum wage, overtime, paid sick leave, and unemployment insurance. While this in a vacuum is positive for the many drivers working long hours, it would likely result in a series of consequences from Uber and Lyft. Especially considering that less than 2% of workers for Uber are active for more or exactly 40 hours a week, with 86% of Lyft drivers on the road for less than 20 hours a week.

The most immediate effect from Uber and Lyft would be a drastic reduction in the workforce the companies currently have under their base. Both companies have put out statements essentially guaranteeing that thousands of workers who currently drive for the companies will no longer be paid by the companies as they plan to shut down rideshare services in all or most parts of California to afford and comply with Assembly Bill 5. Especially for drivers in regions without an extremely dense population and high demand for rideshare apps, Uber and Lyft are likely to shut down service within those areas. Assembly Bill 5’s goal is to ensure benefits for freelance workers; however, it may actually result in a massive loss of jobs for those freelancers. In fact, according to recent polling, around 70% of current drivers favor Proposition 22, contradicting much of the debate around the situation.

Final Conclusions

With the California appeals court ruling against Uber and Lyft, the significance of Proposition 22 reaches a major head for the 2020 ballot. With Assembly Bill 5 pushing for benefits, especially for those who work long hours as drivers, Uber and Lyft clearly would also punish many of the over 500,000 drivers currently doing some portion of work for the companies in response in order to afford paying benefits. While the major focus remains on the presidential election, for California voters, Proposition 22 could have an extraordinarily large effect as well, and perhaps one more immediately noticeable.

About the Author


Headshot of Thomas Price

Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.

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