AB5: Pending Compliance for Uber & Lyft Could Impact Operations in the State

On Monday, August 10, a Superior Court Judge in California ruled that drivers of Uber and Lyft must be classified as employees, essentially giving the companies 10 days to make the necessary changes and abide with AB5. This was obviously a key blow to the company’s efforts to push back on the notorious AB5 Bill, that became state law a little more than seven months ago, that attacks the independent contractor model. The companies have been arguing that they are technology companies rather than transportation companies and because of that, their drivers are not core to their platforms. The battle is far from over and will ultimately head to lengthy appeals process.

Because of the Superior Court Judge’s decision, Uber and Lyft have threatened to shut down their operations in the state of California completely. The main concern from the companies is the cost of doing business with their drivers and the impact to their business model that allows them to offer quick, low-cost rides by maximizing the number of drivers on their platforms.

There was an unscientific survey done a few months ago that citied that 70% of the 734 respondents identifying themselves as drivers said they did not want to be classified as employees and enjoy the work of the “gig” business and the flexible hours.

In the upcoming election in November, ballot measure Proposition 22 will let the California people decide (at least for now) on the applicability of AB5 and if companies like Uber and Lyft should be required to classify their employees as employees rather than independent contractors. This could be a potential bailout for Uber and Lyft or another nail in their coffin, at least in California.  

TIA Government Affairs will continue to monitor the AB5 issue and potential implications to our members who utilize independent sales agents in the state of California.

If you have any questions, please contact TIA Advocacy (advocacy@tianet.org).