California sues Uber and Lyft over gig economy law

California is suing Uber and Lyft in the most aggressive move yet to force the rideshare giants to reclassify their drivers as employees.

The state’s attorney-general, Xavier Becerra — backed by city attorneys from Los Angeles, San Diego and San Francisco — has demanded “hundreds of millions of dollars” in unpaid wages and other penalties in a complaint filed on Tuesday.

The lawsuit seeks to enforce Assembly Bill 5, a Californian law that came into effect at the beginning of the year, which is designed to raise the bar for companies wanting to treat their workers as independent contractors.

“These companies will take the workers’ labour, but they won’t accept the worker protections,” Mr Becerra said in a statement on Tuesday. “We intend to make sure that Uber and Lyft play by the rules.”

Uber and Lyft have opposed AB5, instead supporting an alternative measure they say would give drivers better protections, without compromising on the flexibility offered by app-based work.

“At a time when California’s economy is in crisis with 4m people out of work, we need to make it easier, not harder, for people to quickly start earning,” an Uber spokesman said in response to the lawsuit.

“We will contest this action in court, while at the same time pushing to raise the standard of independent work for drivers in California, including with guaranteed minimum earnings and new benefits.”

Lyft said: “We are looking forward to working with the attorney general and mayors across the state to bring all the benefits of California’s innovation economy to as many workers as possible, especially during this time when the creation of good jobs with access to affordable healthcare and other benefits is more important than ever.”

In recent weeks, Uber has begun suggesting workers who are losing income from a drop in demand for rideshare could take up temporary positions at the likes of Amazon and 7-Eleven or, if they hold a commercial drivers’ licence, become truck drivers instead.

But critics of the companies said coronavirus has amplified their concerns that the rideshare industry’s lofty valuations had been generated on the backs of underprotected workers.

“This is a big win for drivers,” said Carlos Ramos, a driver and organiser with the activist group Gig Workers Rising. “Billionaires like to pick and choose what laws they follow. Today California is showing that no one is above the law, not even big tech.”

Earlier this year Uber and the delivery company Postmates challenged AB5 in court, arguing that they were being treated unfairly. In February a judge denied their request to stop the law from taking effect.

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