A judge in California has ordered Uber and Lyft to reclassify their drivers as employees, in what would be the most significant blow yet to the gig economy business model unless it is halted by an appeals court.
The ruling is a victory for California’s attorney-general, whose lawsuit on behalf of the people of California — backed by city attorneys-general from San Francisco, San Diego and Los Angeles — argued that drivers were facing immediate harm because they did not get sick pay or other employee benefits.
Superior Court Judge Ethan Schulman granted a preliminary injunction ordering the reclassification, which would immediately enforce a law enacted last year that Uber and Lyft say will make their businesses unworkable in the state.
He stayed the injunction for 10 days, however, during which time the companies have said they will appeal.
At a hearing last week, Uber and Lyft sought to persuade the judge that an injunction would impact “hundreds of thousands” of gig workers who relied on the flexibility of their platforms.
But Judge Schulman gave that concern short shrift.
“If the injunction the people seek will have far-reaching effects, they have only been exacerbated by defendants’ prolonged and brazen refusal to comply with California law,” he wrote.
He also found that Uber and Lyft’s argument that the existing law did not apply to them was undermined by their expensive efforts to campaign against it.
An appeal raises the possibility that the injunction may be extended beyond the 10 days, which could mean the case will not be concluded before November’s US elections.
California voters will be deciding in November on a measure to exempt app-based workers from the law cited in the current case. Uber, Lyft and other gig economy companies have committed more than $100m to campaign for the exemption.
A Lyft spokeswoman said: “Drivers do not want to be employees, full stop. We’ll immediately appeal this ruling and continue to fight for their independence. Ultimately, we believe this issue will be decided by California voters and that they will side with drivers.”
Uber said that the “vast majority” of its drivers wanted to work independently, and “we’ve already made significant changes to our app to ensure that remains the case under California law”.
The judge on Monday denied Uber’s request to be allowed to defend itself separately from Lyft in the case.
In an effort to strengthen its defence, Uber made several changes to how its app operates in the state, including allowing drivers to set prices and see the destination of a trip before deciding whether to accept it.
Lyft has made no such alterations. In a recent investor call, Uber said the changes to its app had resulted in a loss of market share in the state.