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State moves to reclassify Lyft and Uber drivers as employees

California’s Public Utilities Commission (CPUC) issued an order this week that drivers for transportation network companies (TNCs) qualify as employees under the hotly debated AB-5 law, which specifically makes it more difficult for companies to classify workers as independent contractors. Contractors do not receive paid leave or healthcare, nor has Lyft and Uber needed to abide by minimum wage laws.

Commissioner Genevieve Shiroma wrote in a statement, “For now, TNC drivers are presumed to be employees and the Commission must ensure that TNCs comply with those requirements that are applicable to the employees of an entity subject to the Commission’s jurisdiction.”

The CPUC is in charge of regulating the state’s ride-hail companies, and this ruling impacts the employment status of tens of thousands of workers in the state who drive for Uber or Lyft as well as food delivery services, freelance platforms or those who use gig workers (hairstylists, freelance writers, etc.).

Both Uber’s and Lyft’s stock dropped about seven percentage points after the announcement. The companies each countered, claiming that this ruling will reduce drivers’ wages. They also pointed to measures on the ballot that would revoke AB-5, which went into effect earlier this year.

So far, Uber and Lyft have refused to reclassify their drivers to comply with AB-5, leading to lawsuits from the attorney generals of Los Angeles, San Francisco and San Diego. Four-thousand drivers in the state have also sued for $1 billion in back pay as full-time employees for the TNCs.

There is a hearing set for August 6 on the matter of reclassifying the workers, with attorneys for the California Attorney General’s office said they would file a preliminary injunction to maintain the status quo until the hearing.

Those companies who receive complaints from workers who believe that they are not correctly classified can contact an employment law attorney. These legal professionals can work with clients to determine the right course of action for maintaining or resolving the worker’s status, even if it involves litigation.