Press "Enter" to skip to content

Uber and Lyft Hit With Lawsuit In California Over Controversial AB-5 Law

A group of California attorneys led by Attorney Xavier Becerra filed a lawsuit on Tuesday against Uber and Lyft. The lawsuit claims that the Rideshare companies are violating the new AB-5 tax law in California that requires contract workers and freelancers to be hired on as employees after a certain amount of paid hours.

The law originally targeted companies in Silicon Valley like Uber, Lyft, and third-party delivery services that hire out contract workers to deal with consumers. In the gig economy, many workers depend on income from these apps in order to survive instead of taking on a full-time job elsewhere.

Lyft and Uber, through taking on independent contractors as opposed to hiring out each and every driver as an employee, are then not required to supply any of the traditional benefits that come with a full-time job. Many workers dedicated a full-time jobs’ worth of time into their rideshare gigs each week, so the company’s were able to use the gig economy as a way to hire on more workers without having to give them benefits.

While the lower wage costs on the company’s end enabled it to hire an endless amount of workers, the state of California argued that the gig economy did not mesh well in a society that relies on employer-provided health insurance and other benefits. With so many workers left without insurance, the AB-5 law was intended to encourage those companies to employ workers part or full-time to make up for that.

The eventual lawsuit that was filed on Tuesday described the companies as having evaded responsibilities of having to hire workers on as employees. The lawsuit describes what the companies are doing as employee misclassification, and accuses both Uber and Lyft of having deprived their gig workers of basic benefits that would otherwise be rewarded to hourly or salary workers.

As a result, gig workers that work for either company are faced with increased stressors in a pandemic situation. Not only are they not guaranteed things like healthcare and paid time off, but they’re suffering the immediate consequences of lessened travel during the stay at home orders imposed in the State of California and beyond.

At its core, the lawsuit alleges that the consequence of the gig economy with apps like Uber and Lyft deprive workers of a minimum wage. The company isn’t responsible for how much or how little the workers make on any given day, which means that they face increased uncertainty during a pandemic situation like covid-19.

The lawsuit asks that gig workers receive restitutions as well as fines for thee companies that could mean a penalty of millions of dollars. The companies previously argued that the new AB-5 law would require the companies to change their business models.