California Sues Uber and Lyft Over Driver’s Independent Contractor Classification

Last week, the State of California brought a lawsuit against rideshare companies Uber and Lyft. It alleged that the companies improperly designated its drivers as independent contractors rather than employees.

By classifying drivers as independent contractors, Uber and Lyft have been avoiding workplace protections (like sick leave and overtime pay) and worker benefits (like workers compensation benefits) that are owed to workers classified as employees, according to California and several other cities in California that joined the lawsuit.

In addition, California maintains an unemployment fund which employers pay into on a per-employee basis. These ridesharing companies have not paid into the unemployment fund for their estimated 500,000 drivers in the state.

California forced to pay unemployment benefits for Uber and Lyft drivers

Since the coronavirus outbreak, thousands of California ridesharing drivers have filed for unemployment. Because Uber and Lyft did not maintain unemployment insurance for these drivers, California will the left footing the unemployment bill for these workers according to the lawsuit.

This lawsuit comes two years after the California governor signed AB-5 into law. This statute makes it far more difficult for companies to classify workers like rideshare drivers as independent contractors.

Unfortunately for these workers, many gig companies have continued business as usual – without reclassifying these workers and without providing the additional protections and benefits offered to employees.

What does this mean for serious injury or wrongful death cases against Uber and Lyft?

If more states enact legislation that requires rideshare drivers to be designated as employees, it will not just benefit the drivers receiving additional benefits.

It will also be better for anyone catastrophically injured by a negligent rideshare driver that causes an accident. As a general rule, employees are agents of their employers.

If a rideshare driver is found to be an agent of Uber or Lyft, the rideshare companies can be held liable for all of the damages caused by the negligent driver. In fact, many states and countries are starting to hold Uber and Lyft accountable for their drivers’ actions.

Consider this example. A rideshare driver makes an improper turn and t-bones another vehicle. The passenger of the second vehicle suffers catastrophic injuries and undergoes several surgeries and in-patient hospital stays.

Throughout the course of her treatment, she incurs over a million dollars in medical bills. She’ll have to live the rest of her life with permanent deficits.

As it stands now, most rideshare companies maintain $1,000,000 in liability insurance coverage while a driver has a passenger on board. In this example, $1,000,000 would simply not come close to compensating the injured victim for her considerable losses. It would not even cover her medical bills.

Since most Uber and Lyft drivers aren’t independently wealthy, the liability limits may be all that the victim is able to recover. If the driver is found to be an agent of Uber or Lyft, the rideshare company (and its billions of dollars) would be liable to the injured party.

At the very least, such exposure would encourage these huge companies to maintain a much higher level of insurance coverage to fairly compensate injured workers and protect their own driver’s personal assets from exposure.