Misclassification by Uber and Lyft robs workers of critical protections and results in tens of millions in tax avoidance each year
June 26, 2020 - SACRAMENTO – California Attorney General Xavier Becerra, and the City Attorneys of Los Angeles, San Diego, and San Francisco have announced they will file a preliminary injunction motion to require Uber and Lyft to immediately halt the unlawful misclassification of their drivers as independent contractors. The motion will follow the lawsuit filed by the Attorney General and City Attorneys alleging that Uber’s and Lyft’s misclassification of drivers deprives workers of critical workplace protections such as the right to minimum wage and overtime, and access to paid sick leave, disability insurance, and unemployment insurance. Misclassification often results in workers being significantly more likely to draw on government-funded income supports to make ends meet, leaving taxpayers to foot the bill in lieu of big business. In fact, a University of California, Berkeley study found that worker misclassification by Uber and Lyft is estimated to have resulted in the companies being able to avoid $413 million in contributions over a period of five years to California’s State Unemployment Insurance Trust Fund.
“It’s time for Uber and Lyft to own up to their responsibilities and the people who make them successful: their workers,” said Attorney General Becerra. “Misclassifying your workers as ‘consultants’ or ‘independent contractors’ simply means you want your workers or taxpayers to foot the bill for obligations you have as an employer — whether it’s paying a legal wage or overtime, providing sick leave, or providing unemployment insurance. That’s not the way to do business in California. We’re seeking a court order to force Uber and Lyft to play by the rules.”
“The exploitation has got to stop. We’re taking aggressive action to ensure these drivers finally receive the basic protections owed to all employees,” said Los Angeles City Attorney Mike Feuer. "Ridesharing has been an incredible invention, giving the public another convenient transportation option. But this need not, and cannot, come at the expense of the drivers — or the public itself, with taxpayers left to the foot the bill for key worker protections for which these defendants must pay their fair share.”
"It is time for Uber and Lyft to stop flouting the law and start treating their workers fairly by classifying them as the employees that they are," said San Diego City Attorney Mara W. Elliott. "As the world grapples with the fallout from the global pandemic, these multi-billion-dollar corporations are taking advantage of their employees by denying them basic protections like sick leave and unemployment insurance while failing to pay them a living wage. California taxpayers should not foot the bill for their misconduct."
“It’s time for Uber and Lyft to give drivers the worker protections they deserve,” said San Francisco City Attorney Dennis Herrera. “Drivers are employees under California law, and there’s no reason they should be denied basic workplace benefits like access to paid sick leave or the right to be reimbursed for driving expenses. Uber and Lyft’s current misclassification of drivers not only forces drivers to lose out, but leaves California taxpayers footing the bill for these companies. Now more than ever drivers need these benefits. Despite a campaign of misinformation, nothing prevents Uber and Lyft from properly classifying drivers and giving them flexibility.”
Worker misclassification occurs when a firm treats its employees as independent contractors, thereby evading legal obligations such as minimum wage, overtime, payroll taxes, and workers’ compensation insurance. From their inception, Uber and Lyft have consistently refused to classify their drivers as employees in violation of California law. Instead, the companies ignore the fact that California law allows for drivers to choose when and how much to work and still be classified as employees. Nothing prevents the companies from providing flexibility to their drivers and properly classifying them as employees. By allegedly misclassifying hundreds of thousands of drivers as independent contractors, Uber and Lyft rob workers of critical protections in order to benefit their own bottom lines and create billions of dollars in private wealth for their venture capital investors. Misclassification harms workers by depriving them of basic labor standards and employee social safety net protections that serve as lifelines during times of social and economic crisis. And misclassification hurts taxpayers because taxpayers carry the load for funding social safety net services that out-of-luck workers without protections turn to in times of need.
In the motion that will be filed before the Superior Court of San Francisco, the Attorney General and City Attorneys highlight the need for immediate action against Uber and Lyft and assert that the corporations’ unlawful misclassification:
- Harms drivers, leaving workers struggling to make ends meet — with earnings hovering at or below state and local minimum wage rates. Moreover, as essential workers during the COVID-19 pandemic, drivers ferry passengers in enclosed personal vehicles in close proximity for extended periods of time, all the while laboring with a provisional to non-existent safety net as a result of the companies’ failure to comply with the law;
- Harms law-abiding businesses and their workers, by allowing Uber and Lyft to avoid employer responsibilities and create an unfair competitive advantage — with some estimates calculating the illicit savings from misclassification to be 15 to 39 percent in labor costs across various industries. Misclassification allows Uber and Lyft to shift their labor, vehicle, and maintenance costs onto drivers, creating an unfair marketplace advantage; and
- Harms the public, depriving the state of tax revenue used to provide public services, as well as rewinding the clock on hard-won workplace protections. When fundamental employment protections go unfulfilled, the public is often left to assume the responsibility of the ill effects to workers and their families resulting from substandard wages or unhealthy and unsafe working conditions. Misclassified drivers who may lack access to paid sick days and medical care through workers’ compensation also pose risks to public health by increasing the risk of transmitting diseases such as COVID-19.
Attorney General Becerra is committed to protecting hardworking Americans and their families in California and across the country. Earlier this month, the Attorney General urged Walmart to step up efforts to protect workers and the public during COVID-19. In May, he slammed the President’s reckless executive order forcing meat and poultry processing plant employees to work without adequate protections during the current public health crisis. In March, the Attorney General called on the Trump Administration to halt implementation of a rule on joint employers that threatens to undermine the ability of workers to collect wages they are due. The Attorney General also secured a settlement preventing Burger King, Popeyes, and Tim Hortons from using “no-poach” provisions in franchise contracts, which make it more difficult for workers to seek better pay and benefits at competing franchises. And, in January, Attorney General Becerra filed an amicus brief in defense of the rights of airline flight attendants and California’s labor laws.