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IS UBER AND LYFT’S FIGHT TO KEEP THEIR DRIVERS AS INDEPENDENT CONTRACTORS, ABOUT CARING FOR THE DRIVERS OR REDUCING TAXES?

Growth in technology, the desire for flexible lifestyles, and the goal of reducing work-related stress have contributed to the rise of what is commonly known as the “gig economy,” in which individuals perform freelance, contract or temporary jobs. As much as a third of the working population is already participating in the workforce in this manner rather than pursuing traditional full-time work for employers. While a “gig” employment arrangement has benefits for both an employer and a worker, it also raises larger questions about the responsibilities of the employer and rights of the worker.

In response to the tremendous growth in the gig economy over the last fifteen years, California lawmakers passed Assembly Bill No. 5. In theory, this measure was designed to protect a gig worker’s right to minimum wage, unemployment insurance and paid leave. In practice, it means that employers of gig workers are still required to contribute payroll taxes and pay premiums for workers’ compensation, Social Security, unemployment and disability insurance to the State of California.

Despite passage of Assembly Bill No. 5, two major employers of gig employees, Uber and Lyft, have continued to treat their drivers as independent contractors. In response, California’s Attorney General and the cities of Los Angeles, San Diego and San Francisco filed suit against Uber and Lyft alleging violations of the law. Uber and Lyft argue that their businesses are “multi-sided platforms” or “matchmakers”, rather than transportation companies and application of the law would harm their drivers by decreasing their flexibility to set their own hours. Though they have not said as much, application of Assembly Bill No. 5 would also harm the bottom lines of Lyft and Uber by requiring huge payouts of taxes and premiums.

So far, the Court appears to agree with the State. It issued a preliminary injunction to prevent Uber and Lyft from misclassifying their drivers as independent contractors, prompting the companies to threaten operational shutdowns pending appeal of the injunction. Last month, the Court granted a stay of the preliminary injunction pending the appeal process. While the parties to this litigation would have people believe that this fight is about workers’ rights, it actually just appears to be about taxes. Which issue is more important to voters will become clearer in November when Proposition 22, exempting certain businesses from Assembly Bill No. 5, is on the ballot.

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This article is informational only and meant to provide guidance. It is not meant to be legal advice and it does not create an attorney-client relationship. For what to do in your specific situation, please consult with a qualified Construction Law attorney.

Testimonials

Mahyar was a big part in helping start our company and setting up our corporation. She also went to battle with a Billion dollar Corporation to keep our doors open when they tried everything to shut us down.

Danny Lamping

Classic Refrigeration Company

In 2008 -2009, our company was involved in a lawsuit with over 1 million dollars claimed against us. Mahyar Ghassemian handled our case expertly and conscientiously. She explained on a regular basis the progress of our case and how each of the actions of our opponent would ultimately affect our case. At no time did we feel alone or compromised as Mahyar boldly stayed her course which eventually provided us with the satisfactory outcome we had hoped to achieve. She will be our first call should the need arise in the future.

Kelly Owen

Clarion Construction, Inc.

Many years ago an insurance carrier hired Mahyar Ghassemian to defend my construction firm in civil litigation. Not only was Ms. Ghassemian very knowledgeable and competent regarding the legal proceedings, but she was also personally vested in our well-being; she cared what happened. She counseled us regarding the various options, listened to our input and proceeded accordingly. In multiple cases with Ms. Ghassemian, we have never experienced a negative outcome. Today my first call when a potential legal issue is on the horizon is to Ms. Ghassemian. She is both extremely effective and cost conscious.

Russell Patterson

The Patterson Company

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