A court in California has ordered ride-hailing companies, Uber and Lyft, to classify their drivers as employees, rather than freelancers/contractors.
The order comes at an uncertain time when both companies are grappling with reduced demand for ride-hailing services, as a result of the coronavirus pandemic, even leading to layoffs.
Read Also: Uber to Layoff 14% of its Workforce
In May this year, the Attorney General of California, alongside city attorneys of San Francisco, Los Angeles and San Diego jointly sued the two companies on the grounds of misclassifying their workers.
The labour law, known as AB5, which took effect on 1st January 2020 bars companies from classifying workers as contractors instead of employees.
The misclassification denies the drivers access to unemployment and disability insurance, right to minimum wage and overtime pay, reimbursement for business-related expenses, as well as paid sick leave.
According to the court ruling, “now, when Defendant’s ridership is at an all-time low, maybe the best time (or the least worst time) for Defendants to change their business practices to conform to California law without causing widespread adverse effects on their drivers.”
Consequently, Uber has warned that it may have to hike prices up to 111%
The firms have ten days before the order takes effect to appeal against a preliminary injunction.
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