Already reeling from the coronavirus, Uber’s and Lyft’s fortunes now face another big hit as California’s top labor official takes the ridesharing services to court on charges of “systematic wage theft.”
The state Labor Commissioner’s Office announced on Wednesday (Aug. 5) that it had filed separate lawsuits against Uber and Lyft for violating state law by misclassifying workers as independent contractors, seeking to recover an unspecified amount of wages that it contends the two ridesharing giants owe their drivers.
“The Uber and Lyft business model rests on the misclassification of drivers as independent contractors,” said California Labor Commissioner Lilia García-Brower in a press release. “This leaves workers without protections such as paid sick leave and reimbursement of drivers’ expenses, as well as overtime and minimum wages.”
Given that the lawsuit covers not just the nearly 5,000 Uber and Lyft workers who have filed wage claims with the labor office, but also all of Uber’s and Lyft’s estimated 200,000 drivers in the state, the cost could easily run into the hundreds of millions.
A report by the UC Berkeley Labor Center put a $413 million price tag on the amount the two ridesharing companies would have paid out if they had been obligated to treat drivers as employees in the five years up to 2019.
The lawsuit, in turn, stems from a series of legal and legislative decisions in California that have reclassified Uber and Lyft workers – and freelancers in many other sectors as well – as employees, opening the door to legal action to recover wages and other benefits.
Uber and Lyft have rejected the state’s claims, contending that their drivers are truly independent contractors and that both firms are technology companies, not transportation operations.
Both companies have reportedly contributed tens of millions of dollars to a ballot campaign to overturn California’s independent contractor law, enacted on Jan. 1, that requires Uber, Lyft and other companies to reclassify their drivers as employees.
Massachusetts recently became the first state to follow in California’s footsteps, with Attorney General Maura Healey filing suit last month against Uber and Lyft to force the companies to treat drivers as employees under state wage and labor laws.