The cheating of Uber and Lyft in their desire to cede licenses in California
Uber and Lyft are in the early stages of possibly turning their California drivers into employees.
In fact, they had until yesterday the 20th according to the judgment of the San Francisco Supreme Court.
However, instead of becoming employees of the companies, the drivers would likely become employees of other companies.
In considering this measure, Uber and Lyft assessed how FedEx Ground Package Systems responded to a 2014 Ninth Circuit decision, Alexander v. FedEx, in which the appellate court found that its drivers were employed under California law, AB5.
In order to avoid both the employment situation and possible unionization, FedEx rewrote its contracts with drivers and converted them from freelancers to franchise workers.
This change had dire consequences for workers.
Uber and Lyft seek to cede licenses in California to circumvent AB5 Act
Background
What motivates us to talk about this matter about franchises of so-called “sharing economy” companies?
In April 2020, California Attorney General Xavier Becerra, along with attorneys for the city and other cities in San Francisco, sued Uber and Lyft for classifying drivers as self-employed and asked the court for a preliminary injunction that force companies to comply with the law, highlighting the need for basic protections for workers during the global Covid-19 pandemic.
In response, California Judge Ethan P. Schulman issued a landmark ruling, stating that trucking companies couldn’t wait until November to see what their voters would decide, so they had until August 20 to register s your drivers.
Uber and Lyft lose long-awaited California lawsuit, drivers are employees
Proposition 22
Upon receiving the ruling, the companies threatened to suspend services in California until November, when California voters will vote on Proposition 22.
Proposition 22 would, in effect, create a new category of sub-standard workers for most people of color and the immigrant workforce.
The proposal does not include a minimum wage, unemployment insurance, workers’ compensation, employer-provided health insurance, or sick leave.
If the court order is upheld on appeal, we can expect the companies to fire thousands of low-wage California workers to create a political and economic crisis in which their deceptive proposal could pass.
Uber and Lyft franchises
In its order of August 4, 2020, the California court asked Uber and Lyft to answer this question:
“What steps, if any, have Defendants taken to comply with AB 5… since it went into effect on January 1, 2020?
Judge Schulman, apparently frustrated by their lack of response, wrote in his preliminary ruling on the court sentence: “The defendants clearly did not respond.”
Despite the silence, companies, unsurprisingly, have an alternative strategy.
Both Uber and Lyft are seriously considering “licensing their brands to vehicle fleet operators in California.”
Uber, for its part, already does it in Spain and Germany.
Businesses could create a franchise model in which each driver buys a franchise and functions as an entrepreneur, or they could hire larger fleets that are licensed to use their brands and technology.
In the first scenario, where the drivers are individual franchisees, the question of corporate liability remains unclear.
In October 2018, the ninth circuit, Salazar v. McDonald’s, in which plaintiff workers had sued both the franchisee and the franchisor (McDonald’s) as joint employers (according to the agency’s theory) for violations of California wage and hour laws and lunch and rest break laws .
The appeals court stated that, on the facts, “McDonald’s is not a joint employer of the franchisee’s employees and that the agency and negligence claims fail as a matter of law.”
In the second scenario, which seems more likely, most drivers would be employed, but not by Uber and Lyft.
If, as Lyft representatives put it, the companies follow the FedEx model, Uber and Lyft would hire a secondary company that has a fleet of drivers.
Under California law, this side company (unless established as a cooperative) would have an employment relationship with the drivers who drive for the fleet.
The legal question of “joint employer” liability would remain, but Uber and Lyft, in an immediate sense, would avoid liability as an employer.
The cheating of Uber and Lyft in their desire to cede licenses in California
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