The journey for ride-hailing and delivery service tech companies like Uber and Lyft has seen several bumps in the road. In California, this centered around the passage of AB5, which required the companies to classify their drivers as employees and provide them all the legal benefits that go with this.
The companies responded with Proposition 22 last November, spending hundreds of millions of dollars to secure its passage. Uber had threatened to leave the state over AB5, but Prop 22 allowed them to once again classify their drivers as independent contractors.
No more. On August 20, Alameda superior court Judge Frank Roesch ruled that Proposition 22 was unconstitutional because it infringes on the Legislature’s power to set workplace standards. The decision is centered around a provision in Prop 22, which requires a seven-eights majority of the legislature to vote to grant collective bargaining rights.
Uber has already stated it plans to appeal the ruling, and Judge Roesch has left Prop 22 in effect until the appeal is resolved. It is likely to head to the California Supreme Court.
While Uber has staved off the worst pending appeal, it, along with the other impacted companies, must start to contemplate a return to the pre-Prop 22 days. Along with this is the outstanding question of whether the prior threat to leave the state due to AB5 will in fact be more than just bluster.
For other businesses, the ruling is also worth following. Many industries have challenged AB5 in court and may have considered other measures such as their own proposition. The fate of Uber could provide either a road map to bypassing AB5 or more clarity on the need to remain adaptable to the new law.
With the constant changes that can impact a business, an experienced legal team can help navigate a difficult time for businesses, particularly with the ever-changing landscape for companies during the current crisis.