Car trouble

Drivers for Uber and fellow taxi company Lyft have long argued they are employees rather than contractors, and a US court this week agreed with them.
A Californian appeals court ruled that the two ride-hailing companies had likely broken the law by refusing to classify workers as employees, which meant they were not entitled to employment benefits and the minimum wage. The court’s decision has serious implications for Uber and Lyft, both of which have ferociously fought drivers’ claims in a lengthy legal battle.
The companies will be forced to comply with recent legislation passed in the US – AB5 – which means they can no longer hide behind claims that drivers are contractors. Under AB5 contractors must be free from the company’s control; doing work that is not central to the company’s business; and have an independent business in that industry. The court ruled that since drivers are beholden to the apps from which they secure work, they must be classified as employees.
However, this latest ruling is not enough to put the brakes on Uber and Lyft’s fight back. The two companies – alongside many others whose business models depend on gig-workers – are backing an amendment to AB5, known as Proposition 22, which would exempt them from complying with the law.
The proposition is one of the most expensive in US history and is supported by some of the most profitable tech giants. According to The Guardian, the companies behind Prop 22 have made billions on the contractor-based business model. When Lyft went public in 2019, it was valued at USD22bn and had 1.9 million drivers. Uber was valued at USD82bn ahead of its IPO in 2019 and had 3.9 million drivers.
The stakes are high. Uber argues that if it is forced to comply with AB5 it will be forced to let thousands of drivers go. On the other hand it does seem that the battle over the employment status of gig workers is shifting in favour of labour. Companies like Uber are in many ways the outliers, since a change in the employment status of drivers would significantly affect their business model. But the broader question of the extent to which companies are able to deny an employment relationship with workers on whom they rely extends far further. Legal cases are proliferating. This will be a key ’S in ESG’ factor in the years ahead.

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