Uber, Lyft Drivers Are Employees, Says California Regulator

Uber, Lyft Drivers Are Employees, Says California Regulator

Drivers working for ride-hailing services such as Uber Technologies Inc and Lyft Inc will be conside..

Drivers working for ride-hailing services such as Uber Technologies Inc and Lyft Inc will be considered employees under Californias new gig worker law, the states leading industry regulator said on June 11.

Shares in Uber and Lyft fell 5.3 percent and 4.2 percent, respectively, in early trading, with the new order striking at the heart of the “gig economy” business model of technology platforms like Uber and Lyft that rely on cheaper contract workers.

The decision, by the California Public Utilities Commission (CPUC), which regulates ride-hailing companies across the state, comes six months after a state law took effect that makes it tougher for companies to classify workers as contractors rather than employees. The latter designation exempts them from paying for overtime, healthcare, and workers compensation.

The CPUC in an order on Thursday said it had to enforce state law, determining that drivers for transportation network companies (TNCs), the industry term for ride-hailing operators, would be considered employees going forward.

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Signage for Lyft is seen displayed at the NASDAQ MarketSite in Times Square in celebration of its initial public offering (IPO) on the NASDAQ Stock Market in N.Y. on March 29, 2019. (Shannon Stapleton/Reuters)

“For now, TNC drivers are presumed to be employees and the Commission must ensure that TNCs comply with those requirements that are applicable to the employees of an entity subject to the Commissions jurisdiction,” the commission said in the document (pdf).

The companies have said in the past their drivers were properly classified as independent contractors, adding that the majority of them would not want to be considered employees, cherishing the flexibility of on-demand work.

“If California regulators force rideshare companies to change their business model it would affect our ability to provide reliable and affordable services, along with threatening access to this essential work Californians depend on,” Uber said in a statement.

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