There is immense pressure on Uber and Lyft in California to fundamentally alter their business models and it is ironic as both these companies were founded and ultimately did prosper in the state of California.
The issue that is taken into consideration this time is the classification of their ride-hailing drivers as independent contractors. Both companies have said that drivers are in favor of the flexibility of working as freelancers.
California Attorney General Xavier Becerra along with other city attorneys of Los Angeles, San Diego, San Francisco, argued that the drivers of both the companies were misclassified as independent contractors and ultimately sued the companies.
According to them, these drivers should be employees of the companies under the state’s AB5 law that came into action on January 1st.
A motion for a preliminary injunction was later filed by Becerra in order to compel both these ride-hailing companies to classify their drivers as employees immediately. Moreover, AB5 enshrines the ‘ABC test’ to find out if a particular candidate is an employee or a contractor and this was signed into law last September.
In addition to that, California Superior Court Judge Ethan Schulman ruled that these drivers are central to both the companies and should not be treated as if they are tangential.