Uber and Lyft Dealt Another Blow in How They Classify Drivers

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Uber Technologies (UBER) - Get Report and Lyft (LYFT) - Get Report both received a legal blow from an appeals court, which ruled the ride-hailing companies must treat their drivers in California as employees instead of independent gig workers.

The ruling, handed down late Thursday, upheld a lower court’s order that both Uber and Lyft comply with Assembly Bill 5 and provide drivers with health and other work benefits that typically come with full-time employment status.

While Assembly Bill 5 went into effect in January, Uber and Lyft have not complied, arguing they are tech platforms and are not transportation businesses.

In August, a San Francisco Superior Court judge ordered the companies to employ their drivers. Executives at Uber and Lyft appealed that decision. The appeals court judges dismissed those arguments, saying both companies continue to defy the law. 

The decision comes less than two weeks before an election in which the ride-hailing companies are banking on California voters to approve a ballot measure that would partially exempt them from the labor law.

Proposition 22, which is set for a vote Nov. 3, exempts Uber and Lyft from paying full benefits that employees currently get under California law, such as unemployment insurance and workers compensation, while requiring a pay guarantee for drivers’ time on trips, health care contributions and medical and disability coverage.

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