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California industry regulator says ride-hailing service drivers considered employees

The Public Utilities Commission of the State of California said Thursday that drivers who work for services such as Uber and Lyft will be considered employees, not independent contractors, under California’s new gig worker law.

California Governor Gavin Newsom signed AB 5 into law in September, modifying the California Labor Code to direct that an individual paid to provide labor or services would be considered an employee instead of an independent contractor. There would be an exception provided that the hiring company demonstrated that (1) the hired person was free from the control and direction of the hiring company in connection with the work; (2) the person performed work outside the hiring company’s usual course of business; and (3) the person is “customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

In December Administrative Law Judge Robert Mason asked for a briefing of the applicability of AB 5 criteria to Transportation Network Companies (TNC). The TNCs argued that their drivers met the criteria to be considered independent drivers. However, the California Attorney General, as well as the City Attorneys for Los Angeles, San Diego and San Francisco filed suit against Uber and Lyft for allegedly misclassifying their TNC drivers as independent contractors. Lyft drivers have also sued Lyft, seeking an order requiring Lyft to reclassify its California drivers as employees.

The Public Utilities Commission said that, “for now, TNC drivers are presumed to be employees” under AB 5. The Commission is required to ensure that TNCs comply with requirements applicable to employees.