In a lawsuit by CA's AG, judge issues a preliminary injunction ordering Uber and Lyft to classify their drivers as employees, paused for 10 days for appeals

- Ride-hailing companies ordered to comply with state law — San Francisco judge pauses preliminary injunction for appeal

Bloomberg 2020-08-11

Context & Ripple Effects

This injunction is the escalation of a fight the California AG telegraphed in June, when sources said the office would seek an injunction to force reclassification under AB5 before the case itself was heard. It also extends a legal thread dating back to 2015, when a San Francisco judge granted California Uber drivers class action status.

The 10-day pause is the hinge: Uber and Lyft's motion to extend it was denied on August 14, and a week later the appeals court blocked the order entirely, averting the expected California shutdown. By late October, with Prop 22 on the ballot, an appeals court upheld the lower-court ruling — leaving the classification question to swing between courts and voters.

First-order effects

Uber and Lyft face a binary in California: reclassify drivers as employees, with the payroll and benefits costs that implies, or pull service from the state once the pause lapses.
Drivers in the state see their status flip from independent contractors to employees under AB5 if the order stands, changing pay structure, expenses, and eligibility for benefits.

Second-order effects

The shutdown risk makes the Prop 22 ballot measure the companies' decisive off-ramp, shifting the battleground from a single judge's courtroom to statewide voters.
Rivals and adjacent gig platforms operating under the same AB5 exposure must decide whether to fight alongside Uber and Lyft or pre-emptively reclassify to avoid being named in the next enforcement action.

Third-order effects

If the pattern holds — injunction, stay, appeal, ballot measure — gig-work classification in California settles through referenda rather than courts, weakening AB5 as an enforcement template and inviting other states to test both routes.
A sustained reclassification mandate would restructure ride-hailing unit economics, pushing the industry toward scheduled, higher-density service models that can absorb employee costs.

The trend: Gig-worker classification is being decided less by judges applying AB5 than by an escalating court-then-ballot sequence, with California as the test case other states will copy or avoid.

Discussion

@zck Zak Kukoff on x
Tech-hostile state governments are going to radically change access to new innovation on a state by state basis in the coming years https://twitter.com/...
@factchecker23 Scott Littlehale on x
I'm frustrated that the radio news network of record, NPR, can't get it's news synopsis about the court ruling on Uber/Lyft correct. It's incorrect and skews towards sympathizing with the ride-hailing companies. @veenadubal https://www.npr.org/... https://twitter.com/...
@ktvu @ktvu on x
The ruling won't take effect right away as both Uber and Lyft said Monday they will immediately appeal to a higher court. California judge rules @Uber, @lyft drivers are employees https://www.ktvu.com/...
@josheidelson Josh Eidelson on x
This thread gives a taste of series of events over the past couple years that led up to a California judge today granting a request from the state to order Uber and Lyft to reclassify their drivers as employees (https://www.bloomberg.com/...) https://twitter.com/...
@repdebhaaland Rep. Deb Haaland on x
Uber and Lyft have been taking advantage of their drivers so the corporations can shirk the responsibility to pay into Social Security and Medicare. My bill would make this judge's injunction the law of the land. #TheGigIsUp https://www.cnbc.com/...
@josheidelson Josh Eidelson on x
The companies “are not entitled to an indefinite postponement of their day of reckoning,” judge wrote in today's opinion https://oag.ca.gov/... “It's this simple: Defendants' drivers do not perform work that ‘outside the usual course’ of their businesses” https://www.bloomberg.co…
@rsarver Ryan Sarver on x
There desperately needs to be a third option to our existing employment designations. Uber is well-positioned, and needs to lead here. Many gig workers want flexibility, but don't want to trade that off for benefits that match their commitment. https://twitter.com/...
@josheidelson Josh Eidelson on x
“if the injunction will have far-reaching effects, they have only been exacerbated by Defendants' prolonged and brazen refusal to comply with California law.” https://oag.ca.gov/... https://www.bloomberg.com/... https://twitter.com/...
@veenadubal Veena Dubal on x
As a testament to how little control drivers have, the companies may cry wolf for a few weeks in an effort to bolster their proposition. But remember: UberLyft rely on drivers who need some flexibility in scheduling. If they take that away, they won't have workers. https://twitte…
@josheidelson Josh Eidelson on x
“here, Uber contends that the same legislation it asserts in federal court ‘targeted’ its business does not, in fact, apply to it at all,” the judge wrote in today's ruling. “It is difficult for the Court to take seriously such contradictory positions.” https://www.bloomberg.com/…
@slaughteram Anne-Marie Slaughter on x
Important read. You may disagree, but surely we can find ways to provide BOTH flexibility and benefits. “I Am the C.E.O. of Uber. Gig Workers Deserve Better.” https://www.nytimes.com/...
@daveleeft Dave Lee on x
The judge also tossed aside one key pillar of Uber and Lyft's defence — that they're not in the taxi business, but in the technology platform business. That argument “flies in the face of economic reality and common sense”, the judge wrote.
@daveleeft Dave Lee on x
(cont) “...in federal litigation and of Defendants' concerted effort to overturn the statute.” In other words, if AB5 didn't impact Uber and Lyft, they wouldn't need to spend $100m in an attempt to avoid it.
@daveleeft Dave Lee on x
(cont) “Defendants argue first that AB5 [the gig law] does not apply to them at all because they are not ‘hiring entities’, or because they are exempt from that legislation. This flies in the face of Uber's conflicting claims...” (cont)
@daveleeft Dave Lee on x
Judge: “The People have amply demonstrated a reasonable probability of prevailing on their claim that Defendants are misclassifying their drivers. Defendants' contrary arguments lack merit.” (cont)
@matthewstoller Matt Stoller on x
Judge criticizes Uber and Lyft's “prolonged and brazen refusal to comply with California [labor] law.” “Defendants may not evade legislative mandates merely because their businesses are so large that they affect the lives of many thousands of people.” https://www.cnbc.com/...
@alex @alex on x
this helps explain that uber op-ed timing https://twitter.com/...
@erinmulvaney Erin Mulvaney on x
A California court ordered Uber and Lyft to convert their drivers in the state from independent contractors to employees with benefits. It's an early loss in a court battle the gig economy can't afford to lose. https://news.bloomberglaw.com/ ...
@josheidelson Josh Eidelson on x
Breaking: Judge issues preliminary injunction ordering Uber and Lyft to convert their drivers to employees. The ruling, in lawsuit brought by CA attorney general and cities ( https://www.bloomberg.com/...), comes with a ten-day stay allowing time for appeals https://www.bloomberg…
@daveleeft Dave Lee on x
Big news in gig economy world. Uber and Lyft warned this preliminary injunction could see 100k+ drivers without work in California. Looking into more details now. Standby! https://twitter.com/...
@bcmerchant Brian Merchant on x
and *that* is why you get this BS, which will land Uber's CEO in the hallowed pantheon of op-eds by CEOs, politicians, and leaders lamenting the state of affairs in an area they could *immediately* materially change if they wanted to https://twitter.com/...
@bcmerchant Brian Merchant on x
Everyone has been dunking on this, and rightfully so, but bear in mind that you are not the target audience for this op-ed, which is 100% an Uber lobbying effort to get government to subsidize its business model with meager supports for precarious workers https://www.nytimes.com/…
@helaineolen @helaineolen on x
There's lots to pick apart in Uber CEO @dkhos op-ed, but my “favorite” is where he offers workers the flexibility to choose between health benefits or vacation time. https://www.nytimes.com/... https://twitter.com/...
@jfh Jascha Franklin-Hodge on x
So Uber's proposal is “work full-time for us and we'll give you enough money for ONE benefit.” A 35-hour a week job shouldn't force you to choose between health care and paid time off. https://www.nytimes.com/... https://twitter.com/...
@zohrankmamdani Zohran Kwame Mamdani on x
A front group funded by your company ran ads calling me an “extremist” in the Democratic primary because of our campaign's advocacy for ride-share drivers. Unfortunately for you, we won anyway. So here's our counterproposal: regulation for @Uber, benefits & unions for drivers. ht…
@darakerr Dara Kerr on x
Uber CEO suggests a “third way” for drivers, saying if they're employees jobs can't be flexible. Some experts say this is a false narrative tho. CA's #AB5 says: “Nothing in this act is intended to diminish the flexibility of employees to work part-time or intermittent schedules.”…
@enpancotti Elizabeth Pancotti on x
This is hilarious. Uber CEO in the NYT today arguing that gig work is predatory and advocating for laws to give gig workers benefits. Apparently he does not realize that you can give workers benefits even when the law doesn't require it??? https://www.nytimes.com/... https://twit…
@uber @uber on x
It's time to set a higher standard for independent work—one that offers flexibility when you want it and support when you need it. Read an op-ed by Uber CEO @dkhos on our proposal to give gig workers new benefits and protections. https://www.nytimes.com/...
@nytopinion @nytopinion on x
“Since the first Uber trip 10 years ago,” writes Uber C.E.O. @dkhos, “one existential question has shadowed us: Do we treat drivers well?” https://www.nytimes.com/...
@dkhos Dara Khosrowshahi on x
We can offer gig workers what they want - flexibility AND benefits. In today's @nytopinion, I write about @Uber's proposal to improve our outdated employment system so we can make that a reality. https://www.nytimes.com/...
@arthurdelaneyhp Arthur Delaney on x
Uber got the government to bail out its drivers by making them newly eligible for unemployment, and now Uber wants new rules on its competitors https://www.nytimes.com/...
@benyt Ben Smith on x
Travis Kalamick told me in 2014 (at that dinner...) how good Obamacare was for the company and how he'd like to see benefits expand https://www.buzzfeednews.com/ ... (w @JMBooyah!) https://twitter.com/...

Chronicles