Appeals Court: Uber, Lyft Must Reclassify Drivers as Employees

A California appeals court found that the ridesharing companies likely violated the law by classifying drivers as contractors.

In a blow to ridesharing companies, a California appeals court on Thursday unanimously ruled against Uber Technologies Inc and Lyft Inc, saying that they must classify their drivers as full employees rather than independent contractors.

The panel also found that the state’s case against Uber and Lyft is likely to succeed on its merits, a further blow against the companies and a reaffirmation of the importance of the Proposition 22 ballot measure. If passed by voters in November, the measure would make app-based drivers exempt from California’s new employee classification law.

The ruling marks a significant development in an ongoing dispute regarding the status of drivers employed by ride-sharing companies in California.

In August, a preliminary injunction was issued against Uber and Lyft to prevent them from classifying their drivers as contractors, which the companies called “unprecedented” and “radical” in various filings.

“Although the business context may be relatively new, we conclude that the injunction was properly issued in accordance with enduring principles of equity,” the panel said. “It is broad in scope, no doubt, but so too is the scale of the alleged violations.”

Uber and Lyft said in a statement that they were considering legal options available, including an appeal. “This ruling makes it more urgent than ever for voters to stand with drivers and vote yes on Prop. 22,” Lyft said.

Uber’s statement added that, without if Proposition 22 were rejected, “drivers will be prevented from continuing to work as independent contractors, putting hundreds of thousands of Californians out of work and likely shutting down ridesharing throughout much of the state.”

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