California labor commissioner sues Uber and Lyft, alleging wage theft

In its latest move to take gig economy companies to task, California is suing Uber and Lyft for alleged wage theft. The state says the companies have “willfully” misclassified drivers as independent contractors instead of employees, depriving them of basic worker protections and wages.

The lawsuits, brought by California Labor Commissioner Lilia García-Brower, seek to “stop the two companies from misclassifying their drivers and allow the Labor Commissioner to recover unpaid wages and other compensation that drivers are entitled to,” according to a post on the labor commissioner’s website Wednesday.

Filed in Alameda County Superior Court, the lawsuits request that the court order Uber and Lyft to stop misclassifying their drivers as independent contractors.

Assembly Bill 5, a landmark California employment law, ramped up the battle over contractor classification of gig economy workers. The law, which took effect Jan. 1, established stricter standards by which workers can be treated as independent contractors rather than employees.

Companies such as Uber, Lyft and DoorDash have put up a vehement fight against the legislation, pouring millions of dollars into a ballot measure called Proposition 22 that would carve out a third category of work for drivers and essentially grant the companies an exemption from AB 5.

“The vast majority of California drivers want to work independently, and we’ve already made significant changes to our app to ensure that remains the case under state law. When 3 million Californians are without a job, our leaders should be focused on creating work, not trying to shut down an entire industry,” Uber spokesman Davis White said in an email.

Uber and Lyft often say independent contractor status is a boon to drivers, who want flexible hours and need the work. Although some surveys have shown support from drivers for the companies’ stance, many have pushed back. Since February, more than 2,000 California ride-hailing drivers have filed claims against the companies, alleging Uber and Lyft owe them more than $630 million in wages, expenses and damages.

Lyft alleged the state filed the lawsuit in order to reduce its work on these wage claims in a response Wednesday. “The state labor agency has botched thousands of claims. They know they don’t have the ability to process these claims, so they sent them into a legal abyss, where they know it will take years to resolve them,” Lyft spokeswoman Julie Wood said in an email.

The complaint against Uber describes how the company set up subsidiaries called “Rasier” and “Rasier-CA” to act as intermediaries with drivers. Rasier licenses the technology from Uber and hires drivers. Using the subsidiaries as shell companies, Uber incorrectly claims that drivers alone are offering on-demand rides, the complaint alleges. The suit alleges the setup is an “effort to obfuscate the evident conclusion that Uber’s drivers are its employees, as a matter of law.”

Both complaints note that the California Public Utilities Commission, which regulates Uber and Lyft, said in a June 9 decision that ride-hailing company drivers are employees. The suits argue that Uber and Lyft have failed to pay drivers minimum wage, overtime, compensation for rest periods and business expenses, among other damages. The defendants are also liable for civil penalties of at least $10,000 for each driver who has been misclassified, according to the complaints.

The labor commissioner’s announcement of the lawsuits comes one day before a hearing on another state lawsuit against Uber and Lyft brought by state Atty. Gen. Xavier Becerra and the city attorneys of Los Angeles, San Diego and San Francisco in May. Becerra said in June that they planned to seek a preliminary injunction forcing the companies to treat drivers as employees before the case proceeds. The hearing is set for arguments on that motion.

The announcement received wide praise from labor groups such as Rideshare Drivers United and the Transport Workers Union.

“Labor Commissioner Garcia-Brower is standing up for workers and holding these companies accountable,” Transport Workers Union International President John Samuelson said in a news release. “For years Uber and Lyft have been stealing wages and exploiting every legal loophole they can to avoid paying drivers what they deserve. It was shameful before and it is even more shameful now, during the middle of a pandemic, that we have allowed wealthy companies to get away with this. This lawsuit is an essential part of holding these companies accountable and protecting drivers’ rights.”