A California appeals court on Tuesday listened to arguments by lawyers for Uber Technologies Inc, Lyft Inc and the state of California about whether the state can recognize their drivers as employees with the right to minimum wage, overtime pay, health insurance and unemployment insurance.
The case is part of a battle over the future of the so-called gig economy in California. In January, the state implemented a law making it harder for ride-hail, food delivery and other app-based companies to classify workers as independent contractors.
While state law gives the appeals court 90 days to issue a ruling, a decision on the future of gig work will likely be made by California’s voters on Nov. 3 instead.
Uber, Lyft, DoorDash, InstaCart and Postmates have collectively spent more than $184 million to write and support a ballot measure that would overturn the state gig worker law, also known as AB5.
In May, California and the cities of Los Angeles, San Diego and San Francisco sued Uber and Lyft for allegedly violating AB5 by refusing to reclassify drivers. A California judge in August ordered the companies to reclassify their drivers as employees within 10 days.
That ruling was put on hold when the companies, under the threat of leaving the state altogether, appealed the decision.
During Tuesday’s nearly two-hour hearing before California’s 1st District Court of Appeal, Uber’s and Lyft’s lawyers told the three-judge panel the lower court had ignored their evidence and ruled in the state’s favor based on faulty assumptions.
The attorneys said the law would cause irreparable harm to the state and its residents, with the companies forced to overhaul their business models and cut thousands of part-time drivers from their platform.
A lawyer for the state and cities said harm was already caused to misclassified drivers and other California businesses that follow the law.