In the ongoing battle over the classification of gig workers, a California state court judge recently ruled in favor of workers being classified as employees, as opposed to independent contractors. The California Attorney General had filed suit against Uber and Lyft in the Superior Court of California, County of San Francisco, seeking an injunction that would force the two rideshare companies to classify its drivers as employees. The case was brought under California’s recently passed Assembly Bill 5, which codified a new “ABC Test” for classifying independent contractors that would make it more difficult for businesses to consider a worker as an independent contractor.
While the court issued a preliminary injunction in favor of the State of California, it permitted a stay of the injunction pending an appeal. Any declaration of victory is thus premature as this case winds its way through the appellate courts. Regardless, this case will continue to draw national attention given the profound economic stakes. As the Supreme Court of California recently stated in the landmark Dynamex case:
[T]he question whether an individual worker should properly be classified as an employee or, instead, as an independent contractor has considerable significance for workers, businesses, and the public generally. On the one hand, if a worker should properly be classified as an employee, the hiring business bears the responsibility of paying federal Social Security and payroll taxes, unemployment insurance taxes and state employment taxes, providing workers’ compensation insurance, and…complying with numerous state and federal statutes and regulations governing the wages, hours, and working conditions of employees. … On the other hand, if a worker should properly be classified as an independent contractor, the business does not bear any of those costs or responsibilities, the worker obtains none of the numerous labor law benefits[.]
Interestingly, Uber’s CEO, Dara Khosrowshahi, recently penned a New York Times op-ed in which he cast blame on the binary employee/independent contractor legal classification. In arguing against these rigid legal categories, he proposed a new legal classification that would afford gig workers the continued flexibility of independent contractors while at the same time offering them benefits typically reserved for employees. Such a solution, of course, would require actual legislation, as well as casting aside decades of jurisprudence on the employee/independent contractor distinction.
The California case will bear close watching as other states decide to follow or reject California’s approach to regulating the gig economy.