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Column: In a ruling protecting AB 5, a judge loses patience with Uber and Lyft 'nonsense'

Michael Hiltzik, Los Angeles Times on

Published in Business News

The ride-hailing gig company Uber has made its way in this complex world largely by flouting local laws and denying to its drivers the benefits of formal employment.

Courts and regulators have been taking an increasingly skeptical view of these practices. Few, however, have questioned them as bluntly as San Francisco Superior Court Judge Ethan P. Schulman.

The judge on Monday ordered Uber and Lyft, its smaller ride-hailing competitor, to reclassify their drivers as employees rather than independent contractors. (He gave the firms 10 days to comply in case they wished to appeal.)

Schulman's order could deal a heavy blow to the companies, which have said their business models depend on avoiding the costs of employment and sticking their drivers with such expenses as fuel, vehicle upkeep and insurance.

What's especially notable about the order is the directness of Schulman's language about the companies' legal positions, which include the assertion that they're not really in the transportation business -- they just provide drivers and passengers with an app allowing them to hook up.

Schulman calls this argument "nonsense." He says it "flies in the face of economic reality and common sense." He notes "glaring inconsistencies" between the companies' position and statements they've made in other courtrooms and other contexts. He accuses Uber and Lyft of a "prolonged and brazen refusal to comply with California law."

 

He states, "It is high time that they face up to their responsibilities to their workers and to the public."

This is not the first time that the companies have been taken to task in court or by government regulators. A federal judge quoted by Schulman accused them earlier this year of "thumbing their noses" at state legislators and regulators.

The California Public Utilities Commission, which had carved out a special regulatory designation for "transportation network companies," informed the companies that as of last Jan. 1 their drivers "are presumed to be employees" and advised that the law requires them to provide the drivers with workers' compensation benefits starting July 1.

But Schulman's may be the sternest words laid against either of the companies since 2015, when Federal Judge Jed Rakoff of New York took Uber to task for allegedly lying in his court about a scheme to investigate a plaintiff who had sued its then-CEO, Travis Kalanick, for antitrust violations. Uber's activities, Rakoff said then, raised "a serious risk of perverting the processes of justice before this court."

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