clock menu more-arrow no yes mobile

Filed under:

Uber and Lyft say they don’t plan to reclassify their drivers as employees

Politicians in California have passed a new bill aimed at making gig economy companies give workers more protections, like a minimum wage. But the real test will be in the courtroom.

Uber CEO Dara Khosrowshahi wearing sunglasses.
Uber CEO Dara Khosrowshahi says the company will continue to treat its drivers as contractors, not employees, despite a new California labor rights’ law that makes it harder to do so.
Drew Angerer/Getty Images
Shirin Ghaffary is a senior Vox correspondent covering the social media industry. Previously, Ghaffary worked at BuzzFeed News, the San Francisco Chronicle, and TechCrunch.

On Wednesday morning, California passed AB 5, landmark legislation aimed at giving gig workers such as Uber drivers greater protections — minimum wage, overtime pay, etc. — by classifying many of them as employees rather than contractors.

But Uber has said it will continue its business as usual and that it has no plans to change how it classifies its drivers. The company argues that the new legislation doesn’t mandate the company to make a change but only applies a stricter legal test to determine if Uber’s workers are truly independent contractors — a test the company thinks it can pass.

“Just because the test is hard doesn’t mean we won’t be able to pass it,” said Uber’s chief legal officer, Tony West, in a press call on Wednesday afternoon.

The test in question is called the “ABC test,” which establishes a set of requirements for employers who want to hire contractors. As Vox’s Alexia Fernández Campbell explains:

“To hire an independent contractor, businesses must prove that the worker a) is free from the company’s control, b) is doing work that isn’t central to the company’s business, and c) has an independent business in that industry. If they don’t meet all three of those conditions, then they have to be classified as employees.”

West argued that since “drivers’ work is outside the usual course of Uber’s business,” which he defined as “serving as a technology platform for several different types of digital marketplaces,” drivers should not be considered employees. Uber has long argued that because it connects drivers to customers with an app, it’s fundamentally a technology company and not a transportation one — an idea that many have pushed back on.

A spokesperson for Lyft similarly told Recode that the company has no immediate plans to reclassify its drivers.

Now, it’s up to California’s courts to decide whether or not these companies’ arguments make sense.

In the past, the responsibility was on Uber and Lyft drivers to sue if they felt they were being misclassified as employees. But under the new law, California cities can also take Uber and Lyft to court, posing a potentially more serious legal challenge.

In the meantime, Uber, Lyft, and DoorDash have all contributed $30 million each into a fund for a new California ballot proposal that would counteract AB 5. While the proposal isn’t drafted yet, it would likely include some concessions to labor such as a guaranteed wage floor in exchange for not classifying drivers as employees.

For organizers who have been campaigning for greater driver rights around AB 5 for months, it comes as no surprise that the companies aren’t making any changes despite labor advocates’ legislative victory.

“[Uber and Lyft] have not shown themselves to be good corporate bosses nor corporate actors,” said Shona Clarkson, an organizer for Gig Workers Rising, a group that has advocated for driver rights. “This just means that drivers will have to continue to build their movement and power.”