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California judge blocks Uber, Lyft from classifying drivers as independent contractors

California Judge Ethan Schulman of the San Francisco Superior Court issued a preliminary injunction on Monday against Uber and Lyft, blocking the companies from classifying their drivers as independent contractors.

California passed a new law, Assembly Bill 5, that required companies to classify workers as employees if they controlled how workers did their jobs. The law took effect on January 1. The Public Utilities Commission of the State of California said on June 11 that drivers who work for services such as Uber and Lyft are considered employees, not independent contractors, under the new law.

On May 5 California Attorney General Xavier Becerra and Los Angeles, San Diego and San Francisco City Attorneys filed a lawsuit claiming that Uber and Lyft were violating the law by misclassifying their employees. They filed a motion for a preliminary injunction on June 24 to require Uber and Lyft immediately to stop classifying drivers as independent contractors.

Schulman granted a preliminary injunction Monday, finding that the plaintiffs demonstrated a reasonable probability of prevailing on their claims and showed substantial harm.

The judge found plaintiffs showed a reasonable probability of prevailing on their claims because defendants’ arguments lacked merit. The defendants claimed that the new law did not apply to them because they were not “hiring entities.” The judge rejected this, finding that Uber and Lyft were hiring entities. He also wrote that Uber and Lyft drivers did not perform work “outside the usual course” of their business, so the law was applicable.

The judge also found that the plaintiffs showed substantial harm, because there was a presumption of harm where a party violates a statute that was created to protect the public. The California Supreme Court and legislature had also found that there was harm from misclassifying employees.

The defendants argued that the judge should stay the motion for a preliminary injunction, which was rejected. They also moved to compel arbitration on part of the plaintiffs’ claims, but the judge deferred any ruling on the motion.

The enforcement of the preliminary injunction was delayed 10 days to give Uber and Lyft the opportunity to appeal.