By Christy England, Paul H. Tobias Attorney Fellow
The Harms Of Misclassification: The COVID-19 Pandemic And Beyond
As workers across the country face unprecedented challenges, the COVID-19 pandemic has revealed the precarious nature of a particular subset of low wage work: gig work. Deemed essential workers, Uber and Lyft drivers are front and center in any discussion of gig workers, and with good reason. Uber and Lyft have historically misclassified their drivers as independent contractors rather than employees, meaning that drivers are not entitled to healthcare, retirement, or disability benefits, paid medical leave, overtime pay, or workers’ compensation.[i] They are also not covered by legal protections concerning minimum wages, wage theft, and discrimination. Uber and Lyft drivers are especially vulnerable in the time of COVID-19: they are facing wage losses due to decreased ridership, as well as increased health risks, all without access to employer-sponsored healthcare or other benefits that allow those workers classified as “employees” create an economic safety net. At a time when access to healthcare and economic safety are paramount, gig workers are exposed to enormous risks with no recourse. For example, of the rideshare drivers surveyed in New York City at the start of the pandemic, 66% stated they were not provided with PPE, and had to choose between risking contracting the virus or paying for food.[ii] Vulnerable workers in need of cash are asked to expose themselves to a deadly virus, while higher-wage-earners can remain relatively safe. This is a profoundly unjust disparity.
Even before COVID-19, rideshare drivers were struggling. In addition to a lack of benefits, drivers have also been systemically underpaid. After accounting for expenses like insurance, gas, and car depreciation, Uber drivers earn $9.21 in hourly wages[iii], which is below the minimum wage in 13 of the 20 major urban markets where Uber operates. Responses from Uber and Lyft drivers surveyed in the San Francisco area provide a bleak snapshot[iv]:
- 15% of drivers receive some form of public assistance, including 13% of food-delivery workers who depend on food stamps;
- 45% of drivers report they could not handle a $400 emergency expense without borrowing money;
- 20% of drivers are actually losing money to drive because they have to pay for their own cars, gas, insurance, and vehicle maintenance; and
- In the Los Angeles area, 44% of drivers report difficulty paying for work expenses such as gas, insurance, and car maintenance.[v]
California’s Response To Misclassification: AB 5
In response to the misclassification of gig workers, including rideshare drivers, California passed AB 5. AB 5 codified the holding of Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903, and created the presumption that a worker who performs services for a hiring entity is an employee unless the hiring entity demonstrates that a worker is an independent contractor under the “ABC test.”[vi] The ABC test requires the hiring entity to prove that the worker is “free from the control and direction of the hiring entity in connection with the performance of the work, the person performs work that is outside the usual course of the hiring entity’s business, and the person is customarily engaged in an independently established trade, occupation, or business.”[vii] AB 5 applies “for the purposes of the provisions of the California Labor Code, Unemployment Insurance Code, and wage orders issued by the Industrial Welfare Commission.”[viii] This means that rideshare drivers should receive unemployment insurance, sick leave, overtime, minimum wage, meal and rest breaks, and other wage and hour protections. Drivers should also be protected from fluctuations in pay, paid for downtime in between rides, and reimbursed for expenses like gas, insurance, and vehicle maintenance.
Uber and Lyft refused to comply with AB 5, which sparked a series of lawsuits, culminating on August 10 with a California Superior Court judge ordering Uber and Lyft to reclassify their California drivers as employees.[ix] In response, both companies threatened to shut down operations in California.[x] On August 20, a California appeals court stayed the order, permitting both companies to continue classifying their drivers as independent contractors, but with conditions.[xi] The companies must agree to classify their drivers as employees if they lose their appeal and voters reject Proposition 22—a ballot measure exempting Lyft and Uber from AB 5.[xii] Thus, the fate of the drivers will be determined by voters in November.
Proposition 22 And Uber And Lyft’s Misinformation Campaign
Uber and Lyft have waged a multi-million dollar campaign urging California voters to pass Proposition 22.[xiii] Their campaign relies on misinformation, specifically around two main talking points: reclassifying drivers would force the companies to shut down operations, and drivers don’t want to be employees because they would lose their ability to choose when they work.[xiv] Both statements are misleading at best and flat-out false at worst. For context, Uber and Lyft had two years to restructure their workforce and have been on notice of AB 5 since it passed in September 2019.[xv] This gave them more than enough time to begin planning for these changes. Instead, Uber and Lyft both stated flatly that they had no plans to reclassify their drivers.[xvi]
Uber and Lyft’s decision to shut down operations in California is due to their own refusal to follow the law, and not because it would be impossible for them to classify their drivers as employees and remain operational. In fact, multiple gig companies already classify their workers as employees.[xvii] Now that Uber and Lyft have been granted a stay, they have been given even more time to restructure their workforce and should not have to shut down operations entirely. Instead, this threat should be understood as just that—a threat, meant to blackmail drivers and voters into complying with their corporate agenda. Uber and Lyft have misclassified drivers as independent contractors because it is immensely profitable for them to short-change their workers, not because it is impossible for them to classify their drivers as employees. Edan Alva, a driver and organizer with Gig Workers Rising, summed up the cruelty of Uber and Lyft’s actions: “In spite of multiple court rulings and a deadly pandemic, multimillionaire CEOs at Uber and Lyft are choosing to continue to break the law…Eliminating thousands of drivers’ income during a pandemic to avoid following labor law is cruel.”[xviii]
Although Uber and Lyft misclassify drivers to serve their own corporate interests, they are framing it as if they do so for the interests of their drivers. They contend that under AB 5, drivers would not be able to create their own work schedule. This is simply not true. Nothing in the text of AB 5 requires workers to give up their flexibility in order to be classified as employees. In fact, the bill states: “Nothing in this act is intended to diminish the flexibility of employees to work part-time or intermittent schedules.”[xix] Moreover, there is no requirement in other laws or policies that require this change either. An employee may have flexible job hours if the employer and employee have agreed to that arrangement.[xx]
Further, Lyft and Uber have argued that flexibility in hours automatically converts workers into independent contractors. This is not true either. Courts have held that a flexible schedule does not convert an employee into an independent contractor—notably, because it does not mean that the worker is operating in an independently established trade, occupation, or business (i.e., the “C” in the ABC test).[xxi] For example, courts have held that cake decorators, home researchers, nurses, couriers, and restaurant workers are employees, despite the fact that they created their own flexible work schedules.[xxii]
Multiple gig companies like Managed by Q, Hello Alfred, Spin, and Bird already classify their workers as employees while still allowing them to create flexible work schedules.[xxiii] The Dallas-based rideshare startup Alto, which has a similar business model to Lyft and Uber, also classifies their drivers as employees and provides flexibility in scheduling hours.[xxiv] Uber and Lyft refusing to offer flexible scheduling is not a requirement of AB 5 or other laws, but rather an intentional strategy to force drivers to choose between flexibility or worker protections, and to coerce them into opposing their own interests and voting for Proposition 22.[xxv]
Uber and Lyft also claim that under Proposition 22, drivers will receive a guaranteed pay equal to 120% of the minimum wage. However, the UC Berkeley Labor Center estimates that due to loopholes in the initiative, the pay guarantee is actually only $5.64 per hour.[xxvi] They emphatically note that “Harry Truman was president the last time the inflation-adjusted value of the minimum wage was that low.”[xxvii] Contrary to Uber and Lyft’s claims, drivers are only entitled to minimum wage protections under AB 5, and not Proposition 22. Additionally, Proposition 22 would walk back other protections granted by AB 5, notably paid sick leave, workers’ compensation, and unemployment benefits; it even amends the California state constitution to ensure that no legislature or local government can undo the damage done by Proposition 22.[xxviii]
Drivers Can And Should Be Given Both Flexibility And Rights
Drivers want benefits and protections, and have staged multiple protests decrying unfair working conditions and urging lawmakers to pass AB 5.[xxix] Survey data shows that 4 out of 5 drivers would prefer to earn an hourly wage, be reimbursed for car maintenance, and receive workers’ compensation and health insurance, none of which would be possible if they are classified as independent contractors.[xxx] Even for the drivers who value flexibility, it’s clear that they also desire and deserve the benefits and protections that employees receive. They could have both, if Uber and Lyft made a decision to follow the law. If Uber and Lyft genuinely cared about workers as much as profits, they would classify their drivers as employees while still permitting flexible scheduling, as other gig companies have done, rather than forcing workers to choose.
[i] Kate Conger, Adam Satariano and Mike Isaac, “Pandemic Erodes Gig Economy Work,” The New York Times, https://www.nytimes.com/2020/03/18/technology/gig-economy-pandemic.html, updated Apr. 20, 2020.
[ii] Aziz Bah, “I’m a New York City Uber Driver,” Business Insider, https://www.businessinsider.com/uber-lyft-drivers-covid-19-pandemic-virus-economy-right-bargain-2020-7, Jul. 29, 2020.
[iii] “Uber drivers earn the equivalent of $9.21 in hourly wages,” Economic Policy Institute, https://www.epi.org/press/uber-drivers-earn-the-equivalent-of-9-21-in-hourly-wages-uber-and-other-gig-platforms-account-for-far-less-of-the-economy-than-many-estimates-suggest, May 15, 2018.
[iv] University of California – Santa Cruz, “Already vulnerable, gig economy workers in San Francisco suffer during pandemic, survey finds: Unique in-person survey establishes new baseline, while online survey provides a snapshot of pandemic’s effects,” ScienceDaily, www.sciencedaily.com/releases/2020/05/200505093116.htm, May 5, 2020.
[v] “More Than a Gig: A Survey of Ride-Hailing Drivers in Los Angeles,” UCLA Labor Center, https://www.labor.ucla.edu/publication/more-than-a-gig, May 2018.
[vi] AB-5 Worker status: employees and independent contractors, Bill Text, https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB5, accessed Oct. 6, 2020.
[vii] Id.
[viii] Id.
[ix] Jay Peters and Andrew J. Hawkins, “Uber and Lyft ordered by California judge to classify drivers as employees,” The Verge, https://www.theverge.com/2020/8/10/21362460/uber-lyft-drivers-employees-california-court-ruling, Aug. 10, 2020.
[x] Sara Ashley O’Brien, “Uber and Lyft get reprieve from court, won’t shut down in California for now,” CNN, https://www.cnn.com/2020/08/20/tech/uber-lyft-california-shutdown/index.html, Aug. 20, 2020.
[xi] Megan Rose Dickey, “Judge grants Uber and Lyft temporary stay in driver reclassification case,” Tech Crunch, https://techcrunch.com/2020/08/20/uber-lyft-emergency-stay-california/?guccounter=1#:~:text=A%20California%20appeals%20court%20judge,overturn%20the%20trial%20court’s%20ruling, Aug. 20, 2020.
[xii] Id.
[xiii] Dara Kerr, “Uber and Lyft drivers could become employees with this law: 10 things to know,” Cnet.com, https://www.cnet.com/news/uber-and-lyft-drivers-could-become-employees-with-this-law-10-things-to-know, Dec. 23, 2019.
[xiv] Id.
[xv] Nicole Lee, “Uber and Lyft had time to comply with the law. They did not.” Engadget, https://www.engadget.com/uber-lyft-ab5-gig-economy-130000612.html, Aug. 21, 2020.
[xvi] Supra note xiii.
[xvii] Nayantara Mehta, “Flexible Work Hours And Employee Status: The Truth About AB 5,” National Employment Law Project (NELP), https://www.nelp.org/publication/flexible-work-hours-employee-status-truth-ab-5, Jun. 21, 2019.
[xviii] Supra note xv.
[xix] Supra note vi.
[xx] Supra note xvii.
[xxi] Id.
[xxii] Id.
[xxiii] Id.
[xxiv] Sara Ashley O’Brien, “Startups race to show what alternatives to Uber and Lyft could look like for California drivers,” CNN, https://www.cnn.com/2020/09/02/tech/dumpling-california-uber-lyft-alternative/index.html, Sep. 2, 2020.
[xxv] Nicole Karlis, “Uber and Lyft launch anti-labor misinformation campaign in response to historic California bill,” Salon, https://www.salon.com/2019/09/11/uber-and-lyft-launch-anti-labor-misinformation-campaign-in-response-to-historic-california-bill, Sep. 11, 2019.
[xxvi] Ken Jacobs and Michael Reich, “The Uber/Lyft Initiative Guarantees only $5.64 an Hour,” UC Berkeley Labor Center, https://laborcenter.berkeley.edu/the-uber-lyft-ballot-initiative-guarantees-only-5-64-an-hour-2, Oct. 31, 2019.
[xxvii] Id.
[xxviii] Proposition 22 Text, https://lao.ca.gov/BallotAnalysis/Proposition?number=22&year=2020, Nov. 3, 2020.
[xxix] Seevarious protests covered by Cnet: “Uber and Lyft drivers protest for better working conditions,” https://www.cnet.com/news/uber-lyft-drivers-stage-protest-for-better-working-conditions/; “San Francisco joins the fight to make Uber and Lyft drivers employees,” https://www.cnet.com/news/san-francisco-joins-the-fight-to-make-uber-lyft-drivers-employees/; “Uber, Lyft driver caravan lands in California capital demanding a living wage,” https://www.cnet.com/news/uber-and-lyft-driver-caravan-lands-in-californias-capital-demanding-a-living-wage.
[xxx] Supra note v.
