California Judge: Uber, Lyft Can't Call Drivers Contractors

A California judge has passed an injunction to force Uber and Lyft to stop classifying their workers as independent contractors rather than employees, CNBC reported.

The order, pending further court action, will take place in 10 days. The companies have requested a brief stay for appeals.

The issue of how the gig workers for the two largest U.S. rideshare companies are classified has been a heated one for some time. By calling their workers independent contractors, the companies don't have to pay for benefits that are afforded to legal full-time employees.

Both companies have been suffering during the pandemic and both have argued against California's measures to force them to classify their workers differently, such as the recently passed Assembly Bill 5 (AB5), which requires companies to classify employees in certain ways. They argue their workers enjoy the flexibility and lack of a regular schedule that come with the gig economy lifestyle.

According to Lyft, drivers "do not want to be employees," and the company, along with Uber, planned to appeal the ruling, CNBC reported. Both companies are involved in a campaign to revoke AB5 in the next state election.

Meanwhile, Uber CEO Dara Khosrowshahi took his opinion to The New York Times, where he argued for a compromise. He said he wants gig workers to have benefits through a new fund set up by the companies that could pay for healthcare and other such necessities.

That said, Khosrowshahi didn't go so far as to advocate for changing the status of workers; he maintained that they liked the flexible gig worker lifestyle.

The order came from a lawsuit filed by California Attorney General Xavier Becerra and the city attorneys from Los Angeles, San Francisco and San Diego. The suit accused Uber and Lyft of violating AB5 and misclassifying workers, with possible penalties in the hundreds of millions of dollars.