Uber, Lyft Take On California In Court Over AB5 Allegations

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Lawyers for Uber, Lyft and the state of California laid out arguments on Tuesday (Oct. 13) for whether or not the state can force the gig economy companies to treat workers as employees and give benefits, Reuters reports.

In January, California implemented its AB 5 law, which required that ride-hailing, food delivery and other such companies treat their workers as employees rather than independent contractors.

But Uber and Lyft have been in trouble since May for reportedly flouting the law, when the state sued them unless they agreed to begin implementing the new rules about workers. The companies instead decided to appeal the suit.

The hearing went on for almost two hours, and Uber and Lyft’s attorneys posited that the lower court had ignored their evidence when ruling against them earlier this year.

The companies’ stance was that California’s new laws would cause “irreparable harm,” according to Reuters, as it would force the companies to make cumbersome changes to their business model and make them cut drivers from the platform to meet the requirements.

Uber CEO Dara Khosrowshahi has written extensively about his opposition to AB5, saying the changes would be destructive to business models, akin to fitting a square peg in a round hole without taking into context the specific needs of new business models. He said the AB5 changes would essentially force hundreds of thousands of drivers out of work “overnight,” PYMNTS reported.

By his calculations, Uber would only have 260,000 drivers if they relied on traditional employment. That means around 926,000 people would be unemployed if the company had to comply with AB5.

California attorneys fired back, saying the damage had already been done to drivers that had been misclassified, Reuters writes.

In addition, Uber, Lyft, DoorDash, Instacart and Postmates have spent over $184 million collectively on a ballot measure for this year’s election that would overturn AB5.

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